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If you're experiencing buyer's remorse after buying an insurance policy — whether you paid more than you'd like or have customer service concerns — you may be wondering if it's too late to cancel. While state laws dictate cooling-off periods or free-look periods for many types of contracts, including life insurance policies, there's no car insurance cooling-off period in the United States. Instead, you can cancel a car insurance policy at any time.
But the cancellation process and potential refund vary by insurer, and there may be consequences to canceling before you have active coverage from another car insurance company. We'll cover everything you need to know to avoid legal mishaps and unnecessary fees when canceling your car insurance policy.
Key takeaways
- You shouldn't cancel your auto policy until you have active coverage with another company, unless you're leaving the country or getting rid of your car and no longer driving.
- If you decide to cancel your car insurance policy, your insurer may charge a cancellation fee, or you may not get a full refund of your remaining premium. But many car insurance companies don't charge any penalties for canceling.
What is a car insurance cooling-off period?
A cooling-off period generally refers to a legally mandated period of time during which a contract, sale, or insurance policy may be canceled. For example, the law in England requires a cooling-off period of at least 14 days for all insurance contracts, including car insurance. In the United States, not all contracts have a legal cooling-off period, though state laws do require a cooling-off period or free-look period for some types of insurance policies.
You can cancel your car insurance policy at any time and for any reason, even if you just bought a policy. But each U.S. state sets its own rules for insurance companies to follow when receiving a cancellation request.
Many states require that car insurance companies refund any unearned premiums to the policyholder when they cancel. But state laws often allow auto insurers to charge cancellation fees or refund premiums on a "short-rate" basis — for example, New York law allows car insurance companies to retain a portion of the remaining premium to cover their costs. Insurers can also elect to charge a flat cancellation fee instead.
In practice, some car insurance companies allow drivers to cancel their policies at no charge and receive a premium refund, though the refund calculation may vary by state. For example, GEICO doesn't charge any cancellation fees, but North Carolina policyholders may receive a short-rate refund rather than a prorated refund. You can find the details of your insurer's cancellation policy in your auto policy documents.
Reasons to cancel car insurance
In some situations, it might make sense to cancel your car insurance policy. But there are caveats to be aware of.
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Getting insurance with a new company
There are many good reasons to switch car insurance companies: You may be unhappy with your current insurer's claims process, or have new coverage needs that your current insurance company can't fulfill. Maybe you're relocating to a geographical area your insurer doesn't cover, or you received a lower premium offer from a competing company.
While it often makes sense to shop for car insurance close to your policy renewal date, it may be wise to compare quotes earlier — for example, if you're adding a teen driver to your policy or getting a new car, you might want to check whether you can get a better deal with another company. Just make sure your new policy is active before the effective cancellation date of your old policy to avoid a lapse in coverage.
You no longer drive
You may decide to cancel your policy if you no longer drive. For example, you might want to sell your car and switch to public transportation, or you may be prohibited from driving due to a DUI conviction. Or perhaps you're planning to travel the world by yacht or move to a lush private island that you can traverse by foot (we admit these are unlikely scenarios, but we can dream).
Keep in mind that you need to maintain liability insurance if you park your car on a public street, even if you're not driving at the moment. Some states require you to surrender your license plates and registration with the DMV before canceling your car insurance policy. If you're storing your vehicle in a garage or private parking space, you might want to purchase a parked car insurance policy to protect against risks like theft or vandalism.
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You're covered under someone else's policy
You may want to cancel your car insurance after another person adds you to their policy. For example, if you're moving in with a significant other, it might make sense to group your coverage under one policy, even if you're keeping both cars. Moving home after college and getting coverage under your parents' auto policy is another common situation. Again, just make sure you're listed on another policy before the cancellation date of your existing policy if you plan to continue driving.
When you shouldn't cancel your coverage
In certain situations, canceling your car insurance coverage could be financially risky or even illegal.
You're still driving
Almost every state requires all drivers to carry liability insurance, and many states require other coverages as well. The penalties for driving uninsured vary by state but can be severe. For example, your driving privileges could be suspended for up to 4 years in California if you're in an accident and you don't have the state minimum car insurance coverage. If you cause damages or injuries to others, you could also face a lawsuit.
If you plan to continue driving, don't cancel your car insurance unless you're switching companies. Even if you're getting rid of your vehicle, you should get a non-owner car insurance policy if you plan to drive in the future.
You're selling your car and buying a new one
If you're selling your car, you need to keep coverage on the vehicle as long as the car is registered in your name. You shouldn't cancel your policy until the sale is complete and you've transferred the title to the new owner. If you're buying a new car, make sure you buy a policy for that vehicle before you cancel the policy for the car you're selling. In most cases, you can simply add your new car to your existing policy and remove your old vehicle after the sale instead of canceling.
You want to modify your coverage
Unless you need coverage that your existing insurance company doesn't offer, you can ask your insurance agent to update your policy rather than canceling. For example, if you decide you want full glass coverage after a rock hits your windshield or you want to drop GAP insurance after a couple of years, your insurance company can help you with those changes. If your policy is unaffordable, you can raise your deductible, remove unnecessary coverages, lower your coverage limits, or enroll in a usage-based program to reduce your premium.
Cancellation fees
Cancellation fees depend on your state's laws, when you cancel, and your car insurance company. You can find the details about fees and refunds in your policy documents. If the cancellation policy isn't listed in the table of contents, look for a section with the title "Conditions," "Terms and Conditions," or "Policy Provisions."
Auto insurers generally charge for cancellation in one of two ways:
- Flat cancellation fee: Some insurers charge a one-time fee of around $50 for canceling your policy midway through your policy term.
- Short-rate premium refund: Some insurers keep a portion of your premium refund, typically around 10%, to cover their administrative costs. For example, if you paid $600 for 6 months of coverage and you cancel your policy after 3 months, you may only receive $270 back.
Note that some car insurance companies don't charge any cancellation fees.
FAQs
Do all insurance policies have a 14-day cooling-off period?
All insurance policies in England have a cooling-off period of at least 14 days. In the U.S., cooling-off periods, sometimes known as free-look periods, vary by state and don't apply to all insurance policies. Car insurance policies in the U.S. don't have a cooling-off period, but you can cancel at any time.
How soon can you cancel car insurance?
You can cancel your car insurance policy whenever you want, even if you just bought your policy a few days ago. But you should first make sure to get coverage elsewhere if your state requires you to carry auto insurance.
Can I cancel my car insurance with an open claim?
As long as your insurance policy was active at the time of the incident, you can cancel your car insurance with an open claim and it won't impact the claims process. But if your car wasn't totaled or you're still driving another vehicle, you should maintain auto insurance coverage in accordance with state law.
Can I pause my car insurance if I'm not driving?
Many insurers allow you to suspend most coverages if you're not driving for an extended period, but you can't pause your premiums altogether. Depending on your state, where you park your car, and whether you want to keep it registered, you may be legally required to keep liability insurance on your vehicle even if you're not driving.
Bottom line
Car insurance cooling-off periods don't apply to U.S. car insurance policies, but you can still change your mind after purchasing a policy. You have the right to cancel your car insurance policy for any reason, but your insurer might charge you a fee in certain circumstances. If you choose to cancel a car insurance policy, you should first understand the legal requirements in your state and determine if you need to get car insurance from another company first.
Our list of the best car insurance companies is an excellent starting point for finding new, and potentially cheaper, coverage.
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