Auto Insurance Cancellation Policies: What You Need to Know

A car insurance policy can end in three ways: the insurer cancels it partway through the term, the insurer declines to renew it when the term ends, or you cancel it yourself. The rules are different for each, and state law protects you more than most drivers realize. Jump to: when an insurer can cancel, non-renewal, non-payment, cancelling yourself, if you're dropped.

When an insurer can cancel mid-term

In the first weeks of a new policy, typically the first 60 days, an insurer has wide room to cancel, for example after reviewing your driving record. After that, in most states it can cancel only for a short list of reasons: you didn't pay the premium, you committed fraud or made a serious misrepresentation on the application, or your driver's license (or that of a regular driver of the car) was suspended or revoked (Insurance Information Institute). A string of claims or a new ticket generally isn't a reason to cancel mid-term, though it can affect your renewal.

Non-renewal: when the insurer won't continue

At the end of a term, insurers have more freedom. They can decline to renew because of your driving record or claims, or for business reasons such as reducing how many policies they write in an area. State law requires advance written notice before a non-renewal takes effect, and in many states the notice must say why (Insurance Information Institute). The exact number of days varies by state. Use that time:

Ask the insurer to explain the decision, and whether it would reconsider, for example if a violation on your record is wrong or about to expire.
If the explanation doesn't hold up, contact your state department of insurance.
Start getting quotes straight away, so the new policy begins the day the old one ends.

Cancellation for non-payment

Missing a payment is the most common reason policies are cancelled. Insurers must send a cancellation notice before the policy ends, and many allow a short grace period, but the details depend on the insurer and the state. Read every billing notice for the exact cancellation date. If you pay before that date, the policy usually continues. Once it has been cancelled, the insurer may reinstate it, sometimes with a gap in cover, or it may refuse and leave you to buy a new policy, usually at a higher price because of the lapse. If you're struggling to pay, call before the due date; see cutting costs when money is tight.

Cancelling your own policy

You can cancel at any time, and you're usually owed a refund of the premium for the unused part of the term. Some insurers deduct a cancellation fee or refund a little less than a straight proportion, so ask first. To switch without problems:

Buy the new policy first and get its start date and proof of insurance.
Cancel the old one effective the same day, in writing or by the method the insurer requires. Simply not paying can leave a non-payment cancellation on your record.
If your car is financed, give the lender the new policy details, or it may buy its own insurance and add the cost to your loan.
If you're selling the car or taking it off the road, check your state's rules first: many states require insurance for as long as a car is registered, and some expect you to surrender the plates before you cancel.

If your policy is cancelled or not renewed

Don't drive uninsured while you sort it out. Penalties for driving without insurance include fines and license or registration suspension, and in some states the insurer tells the motor vehicle agency when a policy ends. If standard insurers turn you down, non-standard insurers specialize in drivers with violations, lapses or claims, and every state has a residual market (“assigned risk”) plan for drivers who can't get cover elsewhere (Insurance Information Institute). After a serious violation, you may also need an SR-22 filing.

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