Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Here's what you need to know...

  • In every state, you are legally required to carry a certain amount of auto insurance to be able to drive
  • You have the right to cancel your auto insurance at any time during your policy term
  • If you are going to keep driving, you will need to find an alternate company for your auto insurance so that you maintain sufficient coverage at all times

You may already know that auto insurance is a legal requirement to be able to drive in almost every state in the U.S.

This means that as long as you plan to drive a car, you need to have proof of valid auto insurance. However, there is nothing that stops you from choosing another auto insurance company before the end of your auto insurance policy term.

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The Basics on Signing Up for an Auto Insurance Policy

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When you sign up for a basic auto insurance policy, it will be for a specific policy term. In general, most auto insurance policies are sold for either six-month or one-year policy terms.

If your auto insurance company decides to not renew your auto insurance policy past your current policy term or cancels your auto insurance before the expiration of your term, you will receive advanced notice of this decision.

On the other hand, you also have the option to cancel your auto insurance policy for any reason.

You do not have to tell your auto insurance company in advance of signing up for your auto insurance policy that you intend to cancel the policy before the expiration of the auto insurance policy term.

If you know when you are signing up for your auto insurance policy that you intend to cancel the auto insurance policy before the policy term expires, you should try to schedule your premium payments in the shortest intervals possible.

It may even be possible to pay your auto insurance policy premiums in monthly installments.

The good news is that when you cancel your auto insurance policy, the auto insurance company will return whatever unused portion of your premium payment remains.

Sometimes, there is a cancellation fee or an administrative fee that must be paid out of your remaining unused premium, but this charge is typically minimal in relation to the monthly cost of your actual premium.

If you do cancel your auto insurance policy early, you need to keep a cancellation notice for your records. You will want to be sure that you are not still charged for your auto insurance premiums, especially if you paid in monthly installments.

When you are shopping around for quotes on auto insurance policies, make sure that you ask about what the payment terms are for each auto insurance company that you are considering.

If you know in advance that you plan to cancel your auto insurance policy before the end of the term that you sign up for, you can inquire in advance about any cancellation or administrative fees that you will have to pay.

You may be able to get a slight discount by paying the entire amount of the premium for your auto insurance policy up front rather than in monthly installments.

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Have Alternate Coverage Lined Up When You Cancel Your Policy

The most important thing to remember about canceling your auto insurance policy is that you have to have an alternative way to get coverage lined up so that you are not in violation of your state laws.

While it may be tempting to think that you can simply sign up for an auto insurance policy in order to be able to purchase a vehicle, your state department of auto insurance or the department of motor vehicles will get a notice when you cancel your auto insurance policy.

In most states, there is a required deadline by which you must sign up for a new auto insurance policy after canceling your old one.

You may not receive a notice from your state department of insurance when this grace period will expire, but you can expect to face stiff penalties if you are caught driving without a required auto insurance policy after canceling your old one.

When you sign up for a new auto insurance policy, the auto insurance company will likely notify your state department of auto insurance or the department of motor vehicles that you have complied with all of the auto insurance policy requirements under your state law.

Even though this notice is provided by the auto insurance company, you still need to keep a copy of your proof of auto insurance coverage whenever you drive in case you are pulled over by a police officer or involved in an auto accident.

Signing Up for Short Term Auto Insurance

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Even though almost every auto insurance company only offers auto insurance policies for six-month or 12-month terms, there is a way to cancel your auto insurance policy before the end of your term.

Make sure that you have a record of the date that you submit a cancellation notice to your auto insurance company so that you do not continue to pay your premiums. You will also need to find another auto insurance policy if you plan to continue driving.

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