Auto insurers encourage motorists to pay their premiums in full with discounts. At least you can avoid paying installment fees if you can settle the bill at once. However, a few people don’t like to pay their premium in full because they are not sure if they will get a proportionate refund if they cancel their 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 companies have to deal with policyholders’ money.
Perhaps it is best to get the savings wherever you can and don’t worry about losing your money because carriers aren’t going to keep more than they must. The least you can expect from insurers is that they return the money they are not entitled. Otherwise, they would suffer the consequences of losing policyholder confidence.
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 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 carriers may have marginal cancellation charges of around $20. However, they may have included it in their calculations of premium for “time on risk” anyway.
Getting a discount for full premium payment 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 it. Overall, you may lose few bucks because of the cancellation 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 insurers before the coverage expires. There isn’t a real benefit of taking this route as most people let their policies run the full term anyway. Besides, most policies are only for six months.
What Happens if I Cancel my 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.