What happens if i cancel my car insurance early? I paid the premium in full at the start and got some discounts for doing so. Do I get a refund if I cancel my car insurance policy early? And what happens to the discount I got for paying in full, would they want it back? Find answers to these questions below.
Car insurance premiums are refundable almost always. Auto insurance companies will do a timely car insurance refund for cancelled policies if there is money to be refunded. Besides, there are rules in every state that regulate how companies have to deal with premiums paid.
Calculation of Auto Insurance Refunds
Although calculations may vary depending on the company they work car insurance refunds on pro-rata basis. They calculate the time on risk and charge required premium for it. Any unused portion of the premium is returned to the policyholder. It doesn’t take long to get the refund either. Many companies send the check within a week. Some companies may have marginal cancellation charges of around $20 but most companies don’t go this route. However, they may have included it in their calculations of premium for “time on risk” anyway.
Getting discounts for paying premium in full is mostly to do with finance costs. They are unlikely to add this discounts back when you cancel the policy halfway. Even they do they can only apply it to the unused portion of the premium. Overall, you may lose few bucks because of the cancellation fees or the fact that car insurance refunds calculations favors the firm. Nonetheless, you get nearly all of the unused auto insurance premiums back and get it in a timely fashion.
That is why it is smart to grab the discounts when you can and reduce your automobile insurance costs. A few motorists are known to hold back on paying in full because they think they may switch insurers before the policy term expires. There isn’t a real benefit of taking this route as most people let their policies run the full term anyway.
What Happens if I Cancel my Car Insurance?
Auto insurance policies can be cancelled mid-term, if you need to. Usually you don’t need to give an explanation as to why you want the cancellation. Quite a few policyholders do so because they found a better deal somewhere else. For insurers, cancellations are everyday events and just part of the business. They already have a process in place to deal with them. You just have to inform them in the fashion they prefer as to when you want them stop insuring you.
Then, you must make sure that you either have an alternative policy coverage in place on the date the current policy ends if you are keeping the car insured. If so, you will be replacing one policy with another and don’t need to to do anything else. There is a high chance the insurer will inform DMV of cancellation of the liabilities coverage. If you still own the vehicle and not going to buy another policy you may have to contact your local DMV and explain why as it is a legal requirement to keep minimum car insurance in every state.