Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states. After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in...

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Reviewed by Jeffrey Johnson
Insurance Lawyer

UPDATED: Jul 14, 2021

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In a nutshell...

  • It is always possible for you to cancel any auto insurance policy that you own even if you are in the middle of a policy term because you are the owner of the policy
  • The auto insurance company may charge you an administrative fee for canceling your policy early, but this fee must be stated in your policy documents so that you are aware of it ahead of time
  • Aside from the small cancellation fee that the auto insurance company may charge, they are required to give you a refund of the unused part of your premium amount
  • When you know that you are going to switch to another provider, you should notify your provider so that you do not continue to be billed for your premium

There is nothing stopping you from being able to cancel your auto insurance coverage with your current provider, but they may be able to charge you a small fee for canceling your policy.

If there is a cancellation fee that is typically charged by your auto insurance provider, this amount will be listed in your policy documents.

You can usually find it on the declarations page of your policy. You can also call the insurance provider and find out what the specific cancellation would be for you over the phone.

The remaining amount of your premium for that term, however, will be returned to you upon the date of cancellation of your policy.

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The Way that You Cancel a Car Insurance Policy

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There are not many steps required in order for you to cancel your current car insurance policy.

Even if you end up paying a small fee for the cancellation of your policy, you will still be able to get a refund of the remaining amount of your premium that has not yet been used for that term.

The amount of your refund will depend on how many days you have left on your current policy term that you have paid for in advance.

If you are in the situation where you have paid for your policy term in advance at the very beginning of the term, then you will receive a much larger refund from the auto insurance company than if you are on a monthly payment schedule for your premium.

In that case, you would only receive a refund based on the unused number of days in the particular month that you have already paid for.

You need to be cautious not to cancel your current auto insurance policy until there is another form of coverage lined up for you.

Otherwise, you will technically be violating the law in your state and subjecting yourself to potential fines.

In addition, if your insurance record shows up as having a time gap in coverage, this could end up costing you more in premiums from your next auto insurance provider.

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When the Company Cannot Charge You a Fee

There is a difference between having your policy canceled and choosing not to renew it for another term. The typical length of an insurance policy term is between six and 12 months, and they are typically set to renew automatically when the end of the term expires.

If your policy is coming up for renewal, this might be a good idea to spend some time checking into seeing whether there are any lower rates for your premium available.

Before you sacrifice any of the coverage that you currently have in order to lower your premium rate, it is definitely worth the time to check into what other rates are available for you online.

One of the key things to remember as you are looking into various auto insurance companies is that customer service is just as important as the rate that you are paying for coverage.

This will be important in knowing that if you have to file a claim under your policy, you can rest assured that it will be handled effectively and that you can depend on your insurance provider to communicate with you in an acceptable way.

You can also ask in advance about any cancellation fees charged by an auto insurance company that you are considering so that you know exactly what you are getting into before you sign a policy with them.

The Bottom Line Depends on Your Situation

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It is possible for car insurance companies to legally charge a cancellation fee if a policyholder decides to cancel a policy before the end of the policy term.

This fee cannot be charged, however, if the owner of the policy simply does not want to renew the policy for another term after it is set to expire.

If you want to cancel your policy early, you are free to do so and will only have to pay the cancellation fee, which must be disclosed in your policy documents by the auto insurance provider.

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