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 Jeffrey Johnson

UPDATED: Jul 14, 2021

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In a nutshell...

  • You have the option to switch auto insurance carriers at any point during your auto insurance term
  • If you aren’t happy with your auto insurance rates, you should always shop around to look for a better deal
  • If you do cancel your policy before the term ends, you may be entitled to a refund if you’ve paid in advance
  • You may not receive your entire refund if the company charges a short-rate fee for terminating the contract early
  • Charging a short-rate fee is standard and it could be a fixed amount of a percentage of the balance due

Auto insurance consumers were once far more loyal than they are today. It wasn’t uncommon for multiple generations in a family to buy their auto insurance through the same agent.

Parents would insure their kids until they became adults and started families of their own and then they would branch off to buy their own coverage through the same agency. Now, consumers switch carriers multiple times throughout their lifetime.

It’s not that consumers of today aren’t as loyal as consumers in the past. One of the main reasons why consumers of the past were so loyal is because shopping for insurance required an investment of their time.

Now, it’s so easy to find a better price that switching carriers to save money doesn’t require much effort. Enter your zip code above to compare car insurance rates.

Can you switch insurance policies at any time?

You don’t have to stay with your current insurer forever. You have the right to switch companies at any time. When you switch auto insurance carriers, you pass the burden of protecting you on to another company.

For taking on that burden, you will pay the company premiums.

One of the motivations for switching insurers is to save money on the premiums that you pay. Another valid reason is to feel more secure in the insurer that you’re employing to pay your claims.

Whatever the motivation is for you, you can switch your coverage to another licensed carrier any time that you’d like to.

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Can an insurer deny you the right to cancel your insurance?

If you were to browse through the terms of your policy, you would find a section about cancellations. Some states have their own contractual rules, but all consumers are allowed to cancel their contract whenever they’d like to.

It is not only a provision that’s built into the contract, it’s also part of every state’s Consumer Bill of Rights.

If you attempted to cancel your policy and the carrier didn’t comply, the company could be fined or worse. This is why it’s so important that you know your rights and you exercise them at all times.

The company could ask you to put your cancellation request in writing, but they can’t deny you the right to cancel your policy even when you have time left on the term.

Will you get a refund for the money that you’ve paid?


Personal auto policies are some of the only policies that are sold in one of the following terms:

  • A six-month term
  • An annual term

If you pay your premiums monthly, you don’t have much of a refund to worry about when it comes time to put in your request for termination.

If you choose another payment method that pays you further in advance, researching the company’s refund policy is critical. You don’t want to cancel a paid-up policy that expires in four months if you won’t be refunded your money.

Fortunately for you, all carriers must refund you at least some of the unearned premiums that you’ve paid.

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What is an unearned premium?

Premiums can be classified as earned or unearned. The term unearned premium describes the portion of the premiums that have already been paid by the policyholder but that has not yet been earned by the carrier because of the time left on the policy.

All of the premiums become earned when the policy reaches its expiration date.

How much of you receive back after your policy is terminated depends on the company’s refund policy.

In some states, all licensed providers must pro-rate the premiums and return all of the money owed. If the company issues a pro-rated refund, you will get a full proportion of the unearned premiums back.

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What is a short-rate fee?


If your carrier doesn’t offer pro-rated refunds, it means that they have a short-rate refund policy in place. Many states do allow their companies to charge at least a minimal fee when their clients terminate their contract early.

This fee helps the company recoup the administrative costs associated with terminating the coverage.

If a fee is deducted from the unearned premiums before the refund is mailed, it is called a short-rate fee. Many people refer to the undesirable refund policy as a short-rate refund.

If you’re debating canceling your coverage early, look over the refund terms to see if it says anything about fees.

How much is the average short-rate fee?

There are a few different ways that you can be charged a short-rate penalty. Some of the fees are straightforward and some of the fees require some calculations. If there’s a fixed fee, it could range somewhere between $10 and $50.

If the fee is a percentage of the unearned premiums, you’ll have to break out the calculator.

If you’re charged a percentage of your unearned premiums, you’ll need to calculate how much of a refund you’re owed on a pro-rated basis first.

After you’ve done that calculation, you can move on to the next step which is deducting the percentage of the fee. If the fee is 10 percent and you owed the carrier $500, your fee would be $50.

Should you wait until your next renewal?

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You should do some more math to determine if waiting until your renewal is best. It’s not wise to switch carriers with 30 days left on the policy if you’ll be charged a $50 fee and you’re only saving $20.

Waiting until your renewal won’t make much difference. If, however, you’re saving hundreds of dollars, it’s worth paying a fee now to save for the entire term.

Switching auto insurance companies could make a huge difference in your monthly budget. If you’re paying a rate that continues to climb, you should get insurance quotes from several companies.

Use your mobile device, log into a comparison site, and see what all of the biggest insurers will charge you today. Use our free tool below to compare for free. Just enter your zip code.