Is it bad to cancel car insurance?

It's not bad to cancel your car insurance, but it's important to do it right. Don't cancel your car insurance until you have a new policy in place to avoid penalties for driving uninsured. Make sure you know about any cancelation fees your car insurance company charges before you cancel.

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Dorothea Hudson has been professionally writing in many spheres since 2013. She has written on entertainment, insurance, finance, travel, technology, AI, renewable energy, crypto, fundraising, and real estate for many websites. Her work has been published for British retailer Marks and Spencer, Kroger Magazine, the Vision Group, and more. Her passions include writing, music, running, travel, te...

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UPDATED: Apr 11, 2022

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Overview

  • You can cancel your car insurance at any point in your policy term
  • If you don’t have a new car insurance policy lined up, you will have a coverage gap
  • Driving without insurance is illegal in most states, and coverage cancelations will be reported to the DMV

Is it bad to cancel your car insurance? Not necessarily. You may have a good reason to cancel a car insurance policy, and you can cancel any time you want. However, you need to make sure you’re in compliance with your state’s laws.

Below we’ll cover when to cancel insurance after selling a car and how to cancel car insurance without penalties or problems with the DMV. Because auto insurance is required by law in almost every state, you need to be careful when you cancel.

Before you cancel your car insurance, look for a new policy. Find affordable car insurance when you enter your ZIP code above for free quotes from top companies in your area.

Is canceling car insurance a bad thing?

In and of itself, canceling your car insurance isn’t bad. There are a lot of reasons to cancel your car insurance, and they include:

  • Car insurance rates increased so that you cannot afford auto insurance with that company anymore
  • A poor customer service experience
  • A bad experience with a claim
  • Moving to a state where your current car insurance company doesn’t operate
  • Selling your car
  • Moving to a new company for a better price or a bundling deal

You may have other reasons to cancel as well, and none of them are necessarily bad. There are a few risks to canceling your car insurance, however, that you should be aware of.

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What are the risks of canceling car insurance?

The biggest risk of canceling your car insurance is driving without insurance. In most states, if you own a car that is registered, you need car insurance. The DMV could revoke your registration if your car insurance is reported as canceled. You may also face fines and other penalties if you are caught driving uninsured.

Of course, you can avoid that risk by replacing the old policy with another one immediately. Make sure that the start date for your new policy is on or before the cancelation date of the old one. Find out how to compare car insurance companies before you start so you’re confident in your choice.

Another risk of driving without insurance is the fact that if you are in an accident after you cancel and have not obtained a new policy, you have no coverage at all. Car insurance can’t be backdated, so you won’t be able to get a new policy to cover the accident after it has happened.

The cost of paying for an accident yourself can be astronomical. A serious accident involving injuries or worse, a fatality can be incredibly expensive. Most people can’t afford to pay out of pocket for damage they have done to others or even to repair their own car. That’s why you should never drive uninsured.

Of course, the risks of canceling car insurance also include potential cancelation fees, so ask about that before you cancel.

If I cancel my car insurance, will I get a refund?

You may be entitled to an auto insurance refund if you have paid in advance for coverage. This can happen  inone of two ways.

First, if you paid your premium for the year in full in advance, you will be refunded a pro-rated amount.

Second, if your insurance company bills out a month in advance (you pay for July’s coverage in June, for example), you may get a refund for unused coverage.

Some insurance companies may use a refund process called short-rating. This means that the insurance company won’t give you a full pro-rated refund to make up for the costs they incurred in writing a policy you canceled early, like administrative costs.

When should I cancel my car insurance?

Can you cancel car insurance anytime? Sure, but as a general rule, the best time to cancel car insurance is when it renews. This avoids any of the issues of canceling mid-term, such as short rating or cancelation fees.

However, if you have sold the car, you should cancel on the day that you have transferred ownership. Bear in mind that if you bought a car to replace the one you sold, most insurance companies will simply replace the car on the policy without the need to cancel and start a new one.

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Is it bad to cancel car insurance? The Bottom Line

It’s not bad to cancel your car insurance, but there are some risks if you don’t follow the right steps. Make sure you have new coverage in place and are aware of any penalties for canceling a policy early.

Before you cancel your car insurance policy, you need to find a new one. We can help. Just enter your ZIP code below, and we’ll give you free quotes from top car insurance companies near you.

Free Insurance Quote Comparison

Enter your zip code below to view companies that have cheap insurance rates.

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