Cancelled Insurance Policies: Do You Get Refunded?

Did you know that even if you've paid in advance, you can switch insurers at any time—and get a refund? We're here to tell you how.

At Quoted, we talk a lot about the importance of shopping around for your auto insurance policy—whether you’re combating possible price optimization, or finding an insurer who can meet your coverage needs, or even making sure everyone in your household is covered by your policy, the best thing you can do for your wallet is to compare quotes from several car insurance companies. And though you may be a convert to our shop-around style, you might think you’re bound to your current insurer until the end of the contract’s term. But getting out of your auto insurance commitment early is actually fairly painless (and cheap!). Even if you’ve pre-paid for a six or 12-month policy, you can switch insurers at any time with (usually) just a nominal fee and the return of your unused balance.

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Cancelling a Car Insurance Policy

We’ve talked about what happens when an insurer cancels a customer’s policy (and why they do it), but drivers also need to know what happens when they want to cancel a policy, and how to do it. The short answer is, as you might expect: results will vary, both state-to-state and insurer-to-insurer. But don’t worry, we have the details, below.

Cancelling your policy without replacing it:

If you no longer need car insurance because you will no longer be driving your car, make sure you follow these important steps:

  • Tell your insurer. Follow their cancellation steps and be sure they issue you a refund for any remaining balance (they will most likely do this on their own, but you should double check).
  • Contact your state’s DMV and let them know why you’re cancelling your car insurance.

Cancelling your policy and beginning a new one with a different company:
If you drive or own a car, you need car insurance in every state (except New Hampshire, but even there you still must prove you can cover damages in the event you cause an accident), so you’ll want to have your new policy all lined up before cancelling your current one, and make sure you won’t have any gaps in coverage (which will lead to higher rates down the line).

Even if you've pre-paid for your policy, you can switch insurers at any time, and get a refund.

Planning Ahead

Some insurers require advanced notice (of up to 30 days) before you can cancel your policy. You’ll want to actually cancel your policy, as opposed to simply no longer paying your bill. Even if you’ve prepaid for a long-term policy, you can get the remaining balance returned to you, but you may have to pay a small cancellation fee.

A few major US carriers charge a cancellation fee, usually of $50:

  • 21st Century
  • Dairyland
  • GMAC

Be aware: even if your carrier doesn’t have a cancellation fee per se, they may still apply a “short rate” fee—usually 10% of your remaining balance. So, if you have a six month policy that costs $600 total, and you want to cancel after two months (and after paying $200 for those two months), you’ll owe $40 (10% of your remaining balance). Esurance, Mercery, and The General all apply a short rate fee for policies cancelled by customer request.

A good rule of thumb before signing on with a carrier is to check out—and ask for details about—all possible fees, including early cancellation fees. And remember, if you’re in the market for a new auto insurance policy, The Zebra has you covered.