There can be many reasons for wanting to end a policy contract like no longer owning the vehicle or finding a much better coverage at a cheaper price. The good news is that you can cancel your auto insurance anytime. However, you may have to pay a fee for aborting it before its term and how much you pay depends on when you stop, policy terms and state laws.
In most cases, cancellation charges may not be enough to deter either because the policyholder doesn’t need it anymore or found much larger savings somewhere else. Not many people choose to change auto insurance mid-policy for a small saving. Most companies don’t charge for policy cancellations, others may charge a small fee but often the amount is negligible.
People who pay car insurance monthly may be under the impression that they have an easy way out. All they need to do is stop paying. It has nothing to do with the way you pay. No matter which payment plan you choose you have the same rights and the same rules apply to everybody.
If anything, you may end up paying more if you don’t stop a monthly plan properly. Grace period for payment may allow it to run a bit more than the date you stopped paying. Paying for the time on risk isn’t a fee charge but it is a payment for coverage you had.
For example, it can cost you more money if you just leave it until the next installment. First of all, you would not get the refund for the days you left it running. Secondly, providers may be persistent and ask for the next month’s premium, rather than cancelling for non-payment. As a result, you may pay a bit more on top of anything else. And the carrier may report you to credit agencies if you fail to pay.
So, it is always best to notify your current insurer of your intentions to stop the coverage and the date. Then, you may need to pay any outstanding amount due to time on risk or they could calculate the refund right up to the last day and send you the money.
Many people may be worried about paying additional charges when they contact the company and just hope that they will give up at some stage. However, you may get some money back because premiums are paid in advance.
You might as well want to stop any automatic payments once all is done. Don’t worry if a company keeps charging you by mistake. They will return the money back in most cases once you show them that you have already bought another policy or you have sold your vehicle.
Most firms calculate refunds on a pro rata basis and return all of the unused premiums. However, they may choose to add a small fee purely for administration. The good thing is that they will return any money you paid but not used. This normally means savings. However, you need to take the costs and benefits into account when you want to switch.
If you want to avoid paying any penalty you may want to wait until the renewal date to change providers. However, if you were saving enough money even after such charges you wouldn’t probably be bothered by these costs.
Remember that you need insurance to drive. That is why you may need to arrange alternative coverage and make sure that it starts either before or at the time the current one stops. Otherwise, you may have a lapse that is seen by other companies when you are getting a quote. A record of lapse usually increases car insurance rates.