Car insurance buyers who cancel a policy before the term is up are entitled to a refund of the unused premium. The insurance company can charge an administration fee to policyholders who choose to do this, though. Drivers who are interested in cancelling a policy which is in force should make sure that they do so in the manner specified by the insurance company.
There are a number of circumstances where an auto insurance policyholder may consider cancelling his or her coverage. A policyholder who is planning to sell his or her vehicle without buying another one right away may wish to do so. A vehicle owner who is planning to park the car for a time may not want to continue to keep it covered while it is off the road, but he or she may want to consider dropping the existing coverage to fire and theft only. A third instance where cancelling the existing coverage can make sense is when the policyholder has decided that he or she is not satisfied with the company for some reason.
How to Cancel an Auto Insurance Policy
The insurance policy should set out the procedure for cancelling a policy during the term that it is in force. If, after reviewing it carefully, the right way to cancel the coverage isn’t clear, the policyholder should contact the insurance company to find out.
Simply stopping making premium payments and waiting for the insurance company to cancel the coverage for non-payment is not a good idea. The policyholder may get the result he or she is looking for (the policy is cancelled), but a lapse in coverage will appear as a black mark on the insurance record.
The best way to cancel an auto insurance policy is to advise the company in writing. The letter should include the following information:
- Policyholder’s full name and address
- Policy number
- Make and model of the vehicle
- Vehicle Identification Number (VIN)
- Effective date of cancellation
It’s a good idea for a policyholder who wants to cancel his or her auto insurance coverage to confirm that he or she has the company’s correct mailing address. Sending the letter by courier or registered mail is a good idea, since these delivery methods provide proof of delivery.
Switching to a New Auto Insurance Company
If the reason for cancelling the existing auto insurance coverage is to switch providers, it’s important to avoid a lapse in coverage. The best way to accomplish this goal is to buy the new policy first and make sure that it is has been issued before cancelling the first one.
A driver who has a lapse in coverage and is involved in an accident does not have this valuable protection in place. He or she would be responsible for paying for personal injury and property damage claims made by the occupants of the other vehicle. Not having insurance coverage in place also means the driver would have to pay the full cost for repairs to his or her own vehicle.