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During difficult economic times, consumers dealing with reduced income or emergency expenses often look for ways to cut back on daily or monthly expenses. While there are many basic measures you can take to cut costs. From generating a detailed budget to deferring payment arrangements with lenders, more drastic options may need to be considered. For example, cancelling your automobile insurance. If you take this step responsibly, it can save a significant amount on a monthly basis as well as over the long term. In order to take this leap prudently, it’s important to understand how to properly cancel your auto insurance. 

When It Is A Good Time To Cancel Your Auto Insurance?

The first thing to get a thorough understanding of is the best possible time to complete the cancellation. Perhaps you are cancelling because you found a different arrangement with a better rate, or have decided to stop using your car for the foreseeable future. In any case, optimal timing can prevent you from the risk of incurring penalties. 

Cancelling Your Auto Insurance At Renewal

Though you can technically call off your insurance policy at any time, it is best to cut ties when your agreement is getting renewed. Typically, this is viewed as the most responsible time to stop your insurance. Without actively (or passively) renewing the contract, you can simply end your policy. While most companies offer a chance to cancel your insurance online, you may have to call in and speak with a customer service representative. The process is fairly straightforward, including you confirming your identity and policy number before cancelling. 

What If You Need To Cancel Mid-Policy?

It’s important to know that you can call off your policy at any given time. However, it helps to perform some due diligence to ensure that either changing your policy for cancelling all together makes sense financially. Consider if you have loyalty-oriented pricing arrangements that may offer you a better deal to stay with the same company. Be certain that, if you are going with a different company, you will actually get a better rate. There are multiple approaches to this, including getting a more skeleton form of coverage. While a new cheaper policy might only cover the basics, it may be able to save you enough money to get you through a tight time.

On the other hand, if you are parking or selling your vehicle, this is less of a concern. Simply be sure that you won’t need the insurance, and that it covers you during any travelling to the site of the car sale. It is a legal necessity to have auto insurance if you are driving your car, even for one short drive. Due to this, it is absolutely essential to be exact about the timing of your coverage. Most companies offer a daily price method so that you can get your monthly fees prorated. So long as you are responsible for keeping the coverage you need, it will be fine to cancel in the middle of your policy.

Find out if your insurance covers your friend driving your car.

Steps To Take To Cancel Your Auto Insurance

Once you’ve decided that you want to cancel with absolute certainty (and you selected the right time to make the leap), there are some simple steps to follow. While the procedure is fairly standardized across the insurance industry, it’s prudent to check with your individual provider. Essentially, the steps are as follows:

  1. Get in contact with your policy provider: Whether digitally, at their offices, or over the phone, the first step is to touch base directly. The agents working for the company will be the most familiar with all options open to you. Additionally, they have access to your policy and its payment history. Once you get in touch, you can get all the information you require. 
  2. Discuss your cancellation options: By speaking to someone with the full picture, you can express any concerns and go over your needs. Perhaps cancelling is the way to go. Alternatively, you might learn about a preferable arrangement. You might be able to cut costs by reducing services associated with your existing policy. There may be a way to bundle with your home insurance to save, as well. 
  3. Research a new provider: Assuming you are keeping your vehicle and plan to drive it, even if it isn’t as often as before, you need to find a new provider. Ensure that you consider more than just price. It is a matter of service, coverage, and benefits. Consider bundling multiple types of insurance, try to reduce your expenses by simplifying your coverage, or select an option that just costs less. 
  4. Cancel old insurance: Now that you know what plan you’ll be moving to, proceed with cancelling your old plan. The next step is to proceed with the cancellation. Ensure that you follow the instructions given to you by the person with whom you spoke. Generally, it is a quick process. Depending on when you cancel and the underwriting of your specific policy, you will either receive a refund or pay a small fee. Knowing what to expect can help you budget properly. 
  5. Time it properly: Last but not least, be absolutely certain that there are no lapses between your coverage periods. This eliminates risk and is well worth the extra few dollars it could cost. 

Pros And Cons Of Cancelling Your Auto Insurance

There are various different benefits and pitfalls associated with cancelling your insurance. While they are unique to each situation, there are some common truths. 

Pros

  • Reduces your monthly expenses
  • Enables you to accrue savings
  • Frees up funds to reduce debt
  • Easy to plan and execute

Cons

  • Pause in coverage could impact future rates
  • Leaves you without protection for your car
  • Reduces your transportation options
  • Limits your ability to bundle insurance services

Consider Asking About Reduced Coverage Before Cancelling

If the drawbacks of cancelling your insurance policy give you pause, there are other options. When you speak directly with a representative of your insurance company, bring up the idea of reducing your coverage. Sometimes, by trimming down your services to the bare necessities, you can save enough to be able to keep the insurance. After discussing a reduction in your current policy,  it’s prudent to research competitor pricing. If you can find an arrangement with a different company that has the same features but is better priced, opt for that instead.

Make sure you avoid these insurance mistakes.

FAQs About Cancelling Auto Insurance

Can I cancel my insurance policy halfway through the year?

You can cancel your auto insurance arrangement at any time. However, depending on how your agreement is structured, you may have to pay an administrative fee or a cancellation penalty. Furthermore, you need to take into consideration whether you pay on a monthly or yearly basis. If you pay for a year’s worth of auto insurance upfront, depending on your provider, cancelling your policy mid-year could be more complicated. 

Will I get any money back if I cancel my auto insurance?

Typically, you should receive a refund when you cancel your auto insurance policy. But, it’s important to understand that all insurance providers are different and handle cancellations differently. If you pay for your insurance monthly and cancel your policy mid-month, you could receive a refund for the days you were not insured. If you pay for your insurance yearly and cancel mid-year, your refund will depend on whether your insurance is pro-rated or short-rated. Speaking with your insurance provider is the most important step to take when deciding to cancel your policy.

Why did my insurance provider cancel my policy without me asking?

There are a couple of situations where an insurance policy gets cancelled without a person requesting the change. Typically, it results from a violation of the terms of your arrangement. Failure to make payments can lead to a cancelled account, though the typical practice is to inform you of the action beforehand. Another scenario is if there is no renewal arrangement in place, though this is very uncommon. This lapse could lead to a lack of coverage. Consult your specific policy for specifics and reach out to an agent if you are concerned. They can provide you with all the details you need to both avoid this situation and handle it.

Final Thoughts

So long as you put the proper thought and consideration into cancelling your insurance, it can be a good way to go. Be certain that you have written proof of the cancellation of your policy. Keeping all of your paperwork for your records can prevent any pitfalls in the arrangement. Bear in mind that it is fairly simple to get car insurance in the future if you choose. By taking prudent financial steps today, you can make way for a brighter future. Cancelling automobile insurance can be a useful step in this direction. 

Corrina Murdoch avatar on Loans Canada
Corrina Murdoch

Corrina Murdoch has been a dedicated freelance writer and editor for several years. With an academic background in the sciences and a penchant for mathematics, she seeks to provide readers with accurate, reliable information on important topics. Working as a print journalist for several years, Corrina expanded her reach into the digital sphere to help more people gain insight into the realm of finances. When she's not writing, you can find Corrina swimming and spending time with family.

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