People cancel their car insurance for many reasons. Some may be looking to make a big move, save money, or buy a new car, making it necessary to cancel their car insurance.
Some people may think this process is long and demanding, but it isn’t. Here are three easy steps to cancel your car insurance and avoid any financial consequences with the company.
Canceling Your Car Insurance
Canceling your car insurance should not be a big deal for people. Most times, it is a simple process that poses little to no financial risks. However, there is a very important caveat that one must always follow.
No matter the circumstances, it would be in your best interest to make sure you avoid an insurance lapse. This way, you’re never unprotected and always feel safe.
Step One
The very first thing to do when one is about to cancel one auto insurance is to make sure you’re avoiding an insurance gap. Therefore, you need to get a new insurance policy from a licensed agent or company before you cancel your old one.
This is because a notable lapse in insurance can lead to serious implications. You can get a ticket or fine or even have your driver’s license suspended. There is also the possibility of jail time for the gap.
Step Two
Once you’ve obtained new coverage or determined that you no longer need one, contact the insurance company whose coverage you want to cancel. Ensure you make a cancellation request, follow the instructions, or pay the necessary cancellation fees.
Also, don’t just stop paying insurance, as that could trigger a lapse in your coverage, and you do not want that to happen.
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Step Three
Make sure you request a policy cancellation confirmation. Most companies require an official cancellation letter or a 30-day cancellation notice to end your car insurance with them. Some also require you to speak to a representative or fill out an online form to cancel.
Regardless of the process the insurer follows, ensure that the coverage has been officially terminated by having documented proof via email or a letter showing the date, application number, and time.
You Can Cancel at Any Time
With most insurance companies, you can cancel your coverage at any time. This is because many people have unplanned expenses or life changes that require them to make unplanned cancellations. Therefore, it is best that people can cancel at any time.
However, it is still important to cancel your coverage only when you have already gotten another one. If you have not paid off your car loan, most lenders mandate that you have a full auto insurance plan at all times.
Why People Cancel Their Car Insurance
There are many reasons why one could want to cancel their car insurance. First, some people no longer drive and do not see the need for a car or its insurance anymore. Some people have also recently sold their cars for various reasons and do not plan to get a new one soon.
For those who sold their cars to get a new one soon, they can change their coverage to a non-owner policy in order to avoid any form of insurance lapse that may occur.
International Movements
Another major reason why people cancel their car insurance is that they may be moving internationally. While most insurance policies work in many countries, it is important to be 100% sure that they do. If they do not operate outside your current country, you would have to cancel your insurance plan with them.
Those who are simply moving to a different state in the United States rarely have to cancel their plans as their insurance usually covers many states.
Someone Else Is Covering Your Insurance
Many people who get married like to have joint insurance policies. Therefore, one spouse might completely cover the insurance on all the cars belonging to the family. Consequently, you might need to change your coverage or cancel it to fit your new lifestyle.
People who have been driving their spouse’s cars for a while or driving cars that don’t belong to them for now can also consider getting short-term or temporary auto insurance.
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Switching Companies
Many people have found companies with better rates and would like to switch insurers. However, the best time to do this is a few weeks before your current coverage is about to expire or is set to be renewed.
It is also important to ensure you’re not switching for better rates while losing money through cancellation fees. Therefore, it is best to ask your old insurer to cancel your coverage on the start date of your new one.
Forgetting To Cancel
Failing to pay your car insurance might put you in a bad financial position in the future. When people get a new insurance policy, they tend to forget the older one, which can lead to a bunch of legal and financial complications.
Most insurance companies give a grace period of 10 to 25 days before they cancel your policy if you don’t pay on time. However, having this on record can lead to more fees and difficulties getting another car insurance coverage.
Are Cancellation Fees Mandatory?
Paying cancellation fees strictly depends on the type of insurance coverage you have and the company’s policy. Some state laws support cancellation fees, depending on where you live.
Depending on the agreement, these fees can be charged as short-rated or flat fees. Flat fees involve paying a one-time flat rate of about $30 to $50 to the insurer. Short-rate fees usually charge about 10% of the unearned premium as the cancellation fee.
Can Insurance Companies Cancel Your Auto Insurance?
The answer to this question is yes. According to the Insurance Information Institute, your insurance company has the legal right to cancel your auto insurance coverage.
However, the law states that this can only be done after the policy has been in effect for at least 60 days. The only reason the insurance company is allowed to do this is when people do not pay their insurance bills or when there are legal issues like fraud, misrepresentation, or suspension of one’s driver’s license.
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