How to Cancel Car Insurance—And When You Should

Whether you’re selling your vehicle or getting married, you might wonder whether you should cancel your car insurance. However, this isn’t a decision that should be made lightly.

While there are some situations in which canceling your car insurance is appropriate, in many cases, you should consider alternative options, such as waiting to cancel until you have a new policy, switching to a non-owner policy, or downgrading your current policy.

This guide outlines when—and when you shouldn’t—cancel your auto insurance. At the end of the article, we will also explain how to cancel your car insurance policy.

Remember, if you have any unanswered questions, it’s always best to consult an independent insurance agent before making significant decisions. Speak to an agent at C&S today to learn more.

When Should You Cancel Your Car Insurance?

Here are a few instances when canceling your car insurance may be a good idea:

If You’re Selling Your Car and Not Replacing It

Perhaps you are moving to an urban area where you will rely on public transit for daily commutes, or maybe you are reducing the number of vehicles your family owns.

In this case, you can cancel the policy associated with that vehicle. However, wait to cancel until you’ve sold the vehicle, signed the title over to a new owner, completed the bill of sale, and submitted a Notice of Release of Liability to your state’s Department of Motor Vehicles (if required in your state).

If You’re Switching Insurance Carriers

When switching insurance carriers, you’ll need to cancel your old policy. However, it’s best to wait until after you’ve purchased your new policy.

Ensuring there is no gap between when one coverage ends and another begins is crucial. Otherwise, you could be left with a lapse in coverage, which, in addition to having legal implications, could cause an unnecessary financial burden.

If You’re Joining Someone Else’s Policy

If you’re getting married or joining another individual’s policy for any reason, ensure you are added to their policy before canceling your own to prevent a coverage gap. Acquiring a multi-vehicle policy is a good idea for households with multiple cars, as these policies typically offer discounts.

When You Should NOT Cancel Your Car Insurance

If you’re still unsure, here are several instances in which you likely should not cancel your car insurance policy.

In general, canceling your insurance policy risks placing a lapse in car insurance coverage on your record. This means you may incur higher rates in the future. Even if the lapse is just for a few days, insurance companies may flag you as a higher risk. You could also lose out on loyalty discounts.

If You Still Plan to Drive Your Vehicle

Canceling your policy in this situation could result in hefty fines, license suspension, or even jail time if you’re caught driving an uninsured vehicle.

If You’re Buying a New Vehicle and Not Selling Your Old One

If you’re purchasing a new vehicle for your household, you can add it to your current policy instead of canceling.

If You Plan to Buy a New Car in the Future

If you’re selling your current vehicle but plan to purchase another within a few months, consider switching to a non-owner policy. This type of insurance will keep you covered when renting or borrowing cars and will prevent a lapse in coverage, keeping your rates low.

When purchasing a new car, you must provide the VIN, make and model, and lienholder (if applicable) to your insurer to add your new car to your policy. Your insurance rate may change.

If You’re Selling a Vehicle, but It’s Still Registered in Your Name

Before canceling insurance on a vehicle you’re selling, ensure you have signed the title over to a new owner, completed the bill of sale, and submitted a Notice of Release of Liability to your state’s Department of Motor Vehicles (if required in your state).

Even if you’re not the one driving it, you could incur fines or have your license suspended if a vehicle registered in your name gets into an accident—for example, during a test drive. Most states require liability coverage (or even additional coverage) for any registered vehicle, even if you are no longer driving it.

If You’re Keeping a Classic Car but No Longer Driving It

If you’re storing an antique car in your garage and only driving it occasionally, you shouldn’t cancel your insurance policy, as the vehicle could still be at risk for theft, falling objects, hail, or other damages. Retaining comprehensive coverage is a good idea.

You may also ask your insurance provider about an “exhibition auto” policy, which allows you to drive the car occasionally. However, classic cars kept for racing likely won’t be covered under this type of policy.

If Your Child Is Moving Away for College

If your child is moving to college without their car, they won’t be driving the vehicle for extended periods. However, you shouldn’t cancel their insurance. They still need coverage when they come home for summer and winter breaks.

If their school is located 100 miles or more away from home, ask your insurance agent about an infrequent driver discount.

If You’ve Paid Off Your Car

Even if you have an older vehicle, it might be tempting to cancel or downgrade your insurance once it’s paid off. While you are still legally required to carry liability coverage in most states, you may be able to drop comprehensive and collision coverage.

However, experts warn against having a liability-only policy, as you would have to pay out of pocket for any damages to your vehicle in an accident.

If You Won’t Be Driving for a Long Period

If you won’t be driving due to medical reasons or travel, you should suspend your policy instead of canceling it.

Depending on your state, suspending your policy may require submitting a written request or canceling your plates. Contact your insurance agent for guidance.

If You’re Moving to a New State

Don’t cancel your policy just because you’re moving. However, contact your insurance provider to ensure your coverage aligns with your new state’s insurance laws.

If Your Policy Is Too Expensive

Instead of canceling your insurance due to high premiums, contact your agent to explore ways to save money.

How to Cancel Your Car Insurance

Now that we’ve covered when you should and shouldn’t cancel your auto insurance policy, here is a step-by-step guide to canceling it.

Purchase New Coverage

If you plan to drive again, acquire a new policy before canceling your current one. Ideally, begin looking for a new policy six to eight weeks before your coverage expires.

Contact Your Insurance Agent

An independent insurance agent can help you cancel your policy. Don’t just stop making payments—you must ensure the policy is fully closed. Have a copy of the bill of sale ready if your vehicle is no longer in your name.

You may have to pay a cancellation fee, but you might also receive a prorated refund for unused premiums. Check with your insurer for details.

Request a Policy Cancellation Notice

You might receive this automatically, but if not, request a policy cancellation notice from your insurer.

Notify Your State’s DMV

Some states require you to notify the DMV when canceling auto insurance. For example, in New York, drivers must turn in their plates before canceling their policies.

Still have questions about canceling auto insurance? Speak to an independent insurance agent at C&S today.