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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Here's what you need to know...

When you buy auto insurance, you have rights. These rights are laid out in the Consumer Bill of Rights that is adopted by each and every state Department of Insurance.

Before you buy personal auto insurance, it’s in your best interest that you know your rights so that you can exercise them.

Since insurance is required in almost every state, you are entitled to buy and choose which company you want to buy your insurance policy through and how long your policy period is.

A policy period is how long the policy will stay in effect with the current rates. On your declarations page, you will find an effective date and an expiration date, which are usually six months or twelve months.

During this time, your rates won’t change unless you make changes to your policy. Here’s what you need to know about canceling your insurance before the term is up.

It’s never too late to comparison shop and make sure you have the right coverage at the best cost. Enter your zip code to get started!

Your Rights as a Consumer

Sometimes, consumers rush to buy their policies to satisfy state laws or to comply with the demands of their lenders.

Fortunately, if you’ve made this mistake, you’re not stuck paying high rates for the rest of the term because you have the right to cancel your insurance.

A major consumer right is that consumers are free to cancel their insurance at any time for any reason.

If you sell your car, move out of state, lose your license, or switch carriers, you can submit a cancellation request so that you don’t have to pay for coverage that you don’t need.

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Can your insurance company cancel you at any time?

If you can cancel your insurance contract at any time, that might leave you wondering if your insurer can do the same.

The answer depends on how long you’ve had insurance. If you have just recently applied for coverage, the insurer has a 60-day window to process a cancellation for any reason.

After the 60-day binding window passes, the insurer is limited in the reasons why it can cancel your insurance.

In most states, insurers can only cancel your policy for fraud, non-payment of premiums, and material misrepresentations. Any other reason must wait until the policy is up for renewal.

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What monies are charged or refunded?

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Depending on the circumstances, you could be charged an early termination fee when you cancel your policy before the expiration date comes.

Some states regulate how much a company can charge, but the fees vary from company to company. It’s important to check the fees before you switch carriers.

In most cases, you are charged a fixed fee for processing an early termination. Some carriers might even charge a percentage of the unused premiums, which is called a short-rate cancellation. Fees may be waived if you’ve sold your car or surrendered your license.

If you have paid your premiums up, you are entitled to a refund for the premiums you’ve paid and have not used, which is called the unearned premium.

If there is a fee for canceling early, the fee is deducted from the pro-rated refund. You should receive your refund check at the address on file within two to three weeks.

The Importance of Canceling Your Policy

If you buy insurance with another carrier, make sure you ask your carrier to cancel your old policy. If you just stop making payments, it could affect your insurance record by having a non-payment cancellation on your record.

The best practice would be to write up a cancellation request so that the company knows you have purchased insurance elsewhere.

Now that you know that you can switch carriers early, you can start to shop around.

Use our FREE online rate comparison tool to compare rates through leading carriers then review the quotes, and decide if there’s a more competitive rate. Enter your zip code to get started!