Companies encourage motorists to pay premiums in full with discounts. At least you can avoid installment fees if you can settle the bill at once. However, a few people don’t like to pay upfront because they are not sure if they would get a proportionate refund if they cancel auto insurance policies. Considering it may be a large sum it is a legitimate concern and below answers should set your mind at ease.
Car insurance premiums are almost always refundable. Insurers will only charge for time on risk and return the rest of the premium paid in advance if a policy is terminated before its time. Besides, there are rules in every state that regulate how policyholders’ money is handled.
Perhaps it is best to get the savings wherever you can and don’t worry about losing money because carriers aren’t going to keep more than they must. The least you can expect is that they don’t sit on the money they are not entitled. Otherwise, they would suffer the consequences of losing customer confidence. Today, markets are moving around offering customers freedom to order without a worry because items can be sent back even after a while as long as they aren’t used. The old “I sold it and it is off my hands” mentally is over.
Calculation of Automobile Insurance Refunds
Although they may vary slightly they usually work premium refunds on pro-rata basis. They calculate the time on risk and charge for it. Any unused portion of the premium is returned to the policyholder. It doesn’t take long to get the money back either. Many companies send the check within a week. Some of them may have marginal cancellation charges of around $20. However, they may have included it in “time on risk” calculations anyway.
Getting a discount for full payment is mostly to do with finance costs. They are unlikely to add this discounts back when you cancel halfway. Even they do they can only apply it to the unused portion of it. Overall, you may lose few bucks because of the fees or the fact that vehicle insurance refund calculations favors the firm. There is a high chance people save by switching carriers or dropping coverage that these little charges won’t bother them.
A few motorists are known to prefer installments and incur additional costs because they think they may switch before the coverage expires. There isn’t a real benefit of taking this route as most people let them run the full term anyway. Besides, usually a term is only six months. By the time you put your ducks in a row another renewal will be around the corner.
What Happens if I Cancel my Auto Insurance?
It can be stopped mid-term, if you need to. Usually you don’t need to give an explanation as to why you are leaving. Quite a few policyholders do so because they found a better deal somewhere else. It is an everyday event 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 to end it.
Then, you must make sure that you already have alternative coverage in place starting on the date the current one is set to end, if you are keeping the car. If so, you will be replacing one policy with another and don’t need to to do anything else. There is a high chance they will inform DMV of the lapse. If you still own the vehicle and not going to buy another coverage you may have to contact local DMV and explain why not, as it is a legal requirement to keep minimum liability in every state.