What to know about cancelling your auto insurance policy
Whether you have been with your auto insurance provider for years and are searching the market to see what savings are out there, or you have had a negative experience and your cancellation is a repercussion of it, it might be time for you to switch providers. Before you make the switch be sure that you know exactly what is involved in the cancellation process.
Notify your old provider
It probably goes without saying but in order to cancel your policy you must contact your provider and let them know your plans. How an insurer handles the cancellation process varies company to company, however many require it to be confirmed in writing. Be sure to include the effective date of the cancellation.
Even if your insurer does not require this, it is often a good idea to file one for your records anyway. This ensures there is no confusion and you have proof if anything goes awry further down the line.
Do be prepared for your insurer to try and reel you back in with discounts and new offers, and keep an open mind, this could work in your favour!
Have a new policy lined up
Before you jump the gun on cancelling your old policy it is a wise idea to already have a new policy lined up. Not only does this ensure that a date for your new coverage to begin is already scheduled, so that you are not left uninsured and at risk of fines, it also means that you are in the know about what costs are involved upfront.
When it comes to signing a new auto insurance policy, it's fairly common for there to be some sign up fees involved. This isn't necessarily a bad thing; do your calculations before agreeing to anything, even with these fees you could still be making major savings in the long run.
Consider the cancellation penalties
How your cancellation process is handled will be laid out in the terms and conditions of your policy which you agreed to when you signed up. You should review any paperwork you have on hand so that you know what to expect. Early cancellation involves administrative costs, as well as any costs that are incurred as a result of how you pay. How much you end up paying can be largely dependent on whether you pay in monthly installments or annually, as well as how far into your policy you are when you cancel. There are two basic methods by which most auto insurance providers will process refunds for a cancellation: pro-rated and short-rating.
Pro-rated: you will be refunded the full amount of the unused premium.
Short-rated: you will lose some of the remaining premium. Some companies will only use short-rating if you decide to cancel in the early stages of your policy, however others will continue to use this method throughout.
Be sure to find out which method applies to you since this could make all the difference when determining if cancelling is really worth it. Sometimes the fees may make it more worthwhile for you to ride out your policy until its renewal date, and then go for a new policy.
Refunds and final payments
If you pay your premium annually then it is more likely that you will qualify for a refund, if your insurer handles your cancellation on a pro-rated basis. You will receive a sum for the remaining term, with any penalties removed. You are not required to contact your bank to cancel your recurring payments-doing this will be deemed as a “non-payment cancellation” and will hinder your attempts at getting a new policy in the future, as well as have the potential to see your premiums skyrocket.
Before making any decisions be sure to do your research and with all things considered, calculate the exact amount you could be saving to determine if a new policy is worthwhile.