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

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Standard car insurance can be purchased in terms that last for either six months or 12 months at a time
  • While there are other short-term policies that you can purchase, standard products are priced the best
  • If you don’t need your insurance for the entire term, you are allowed by law to cancel the policy before it expires
  • When a consumer wants to switch their carrier, they don’t have to wait until the renewal date to make the switch
  • You should always consider how much you’ll be charged to cancel your policy before it expires when you’re shopping around

There are a lot of terms and conditions you have to read through when you’re buying an auto insurance policy.

Not only do you have to be concerned with how your insurance coverage works, you also have to be worried about how the contract works if you don’t want to keep your coverage.

A lot of people assume that they’re tied into an auto insurance policy for six months or even a year when they select a policy period. This is a reasonable assumption but an inaccurate one.

By law insurance companies have to give authorized parties the option to end coverage and sever ties as they desire.

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Here’s what you need to know about canceling your insurance policy before it ends:

How long does your car insurance policy last?

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When you buy the typical auto insurance policy, you have to choose either a six-month or a 12-month policy. The term that you select is how long the policy is guaranteed to last as long as you comply with the terms of your contract.

After that term is up, all of your rating factors are assessed and then it’s decided if you’ll be able to keep your insurance.

If you buy a policy that lasts either six months or a year, you can cancel your policy at any time during the existing term.

It’s actually a state law written into the Consumer Bill of Rights that specifically says that all companies in all states must afford their clients to terminate their policy during the period for any reason.

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What are some of the reasons that you might want to cancel your insurance early?

There are a number of reasons that you might want to write up a cancellation letter to end your coverage with your current auto insurance provider. Sometimes you have control over whether or not you need to end the coverage and other times you don’t.

Here are some of the many examples:

  • You sold your only vehicle and you don’t have any intentions of buying another
  • You have surrendered your license and don’t have any licensed drivers in the home to name on the policy
  • You are moving out of the country and buying coverage in the new country
  • You are moving out of state and registering your car in the new state
  • Your car is inoperable and you put it in storage
  • You get married and you combine your insurance with your spouse
  • You get divorced and need to separate policies that are currently joint
  • You are unhappy with your company’s rates or customer service and you want to switch carriers

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What is the difference between a standard and a short-term auto insurance policy?

There are policies that you can buy that are specially designed for consumers who don’t need coverage for an entire term.

If you’re buying insurance to satisfy laws to get your license or you’re only going to have possession of a vehicle for a week or two, you can buy short-term coverage that lasts for between one and 30 days.

Short-term insurance is a good option for drivers who have issues with their license or who don’t qualify for standard insurance.

It’s not advised to buy short-term coverage if you’ll possibly need coverage longer than a month and if you want to find competitive rates.

The rates for short-term coverage are higher because the policies aren’t underwritten like a traditional policy.

What should you consider before canceling your policy early?


If you can avoid requesting that your insurer terminates your contract, it’s important to review the terms of the contract to see if your carrier charges a fee to cancel the policy.

In many states, the officials do allow you providers to charge fees for early terminations that were initiated by the policyholder.

Not all auto insurance carriers will charge fees but those that do have what is referred to as a short-rate cancellation policy.

In the policy booklet, it will say that the company is entitled to charge each of their customers a short-rate fee for choosing to cancel before the expiration date. When no fee is charged, it is called a pro-rated cancellation.

There are two different types of fees that a provider can charge.

  • Fixed Fee
  • Percentage Fee

Some carriers will charge you a fixed fee regardless of when you’re canceling your insurance and how much is due on the account.

The fixed fee is usually between $25 and $50 and will be assessed by subtracting the fee from your refund of unearned premiums.

Other companies will only charge their policyholders a percentage of the unearned premiums when the policy still has a specific amount of time left.

For example, a carrier might say that if there is more than $300 due on the contract, you’ll have to pay 10 percent of the unearned premiums due. In this scenario, if $450 were due on the balance, you’d pay a $45 fee.

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How do you cancel your policy?

If it makes the most sense to cancel your insurance early, you need to send your request in writing.

You can either visit your agent’s office and submit the request in writing or you can fax or mail it in. Include the following:

  • an effective date
  • the policy number
  • your name
  • the reason for cancellation
  • where to mail your bill or refund

If you are not satisfied with your current rates, it’s time for you to shop the market. You can contact every carrier individually or you can use an Internet insurance comparison tool.

By entering your information, you can compare instant insurance quotes and then see if you’re getting a good deal.

Enter your zip code in the tool below to compare car insurance quotes.