FREE Insurance Comparison

 Secured with SHA-256 Encryption

Call (855) 425-8122

for FREE insurance quotes by phone
Insurance | Free Online Insurance Quotes

Compare Insurance Quotes!

Compare Quotes from Top Companies and Save

 Secured with SHA-256 Encryption

Is there a fee for cancelling car insurance?

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...

Full Bio →

Written by

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...

Full Bio →

Reviewed byDaniel Walker
Licensed Auto Insurance Agenthttps://res.cloudinary.com/quotellc/image/upload/insurance-site-images/insproviders-live/ca745a12-daniel-walker.png

UPDATED: Mar 19, 2020

Advertiser Disclosure

It’s all about you. We want to help you make the right coverage choices.

Advertiser Disclosure: We strive to help you make confident insurance decisions. Comparison shopping should be easy. We partner with top insurance providers. This doesn't influence our content. Our opinions are our own.

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

Here's what you need to know...
  • Under the Consumer Bill of Rights drafted by each state department of insurance, policyholders are free to cancel their policies at any time and for any reason
  • If you’re not happy with your current insurance rates, you can shop around for coverage regardless of when your term is set to expire
  • Before you decide to switch from one carrier to another, you should contact your insurance agent and ask if the company charges a cancellation fee. Cancellation fees are allowed in many states to account for the cost to process the termination
  • Some companies will charge the named insured a fixed fee for any type of early termination and some will charge a percentage of the unearned premiums
  • You should ask the carrier if they will waive the cancellation fee when you sell your only vehicle or when you cancel your policy for reasons that are out of your control

When you take out an insurance policy, you’re entering into a contractual agreement with a Property and Casualty insurer that sells personal car insurance. The contract says that the carrier will pay for the claims that you or third-party claimants make as long as you make your payments and you fulfill your duties as an insured.

The coverage will remain in force for at least as long as the term that’s written on your declarations page. While the insurer is obligated to continue your coverage for the entire term after the policy is issued, you don’t have the same obligation. Insurance policies can be canceled at any time, but there’s a chance you might be charged a fee.

Looking to switch car insurance companies? Check out free online quotes before you cancel your policy with our free search tool.

You Have the Right to Cancel Your Insurance

AdobeStock_107861306-1600x1600

Auto insurance policies are long-term term contracts that last for periods of 6 months to a year. When you enter into an indemnity contract with an insurance company, you have the legal right to cancel the term and break your agreement with the carrier at any time. This right is granted under the state department’s Consumer Bill of Rights.

An insurance company can never deny you the right to cancel your insurance, even if you’re requesting the cancellation so that you can switch to another carrier. In fact, one of the main reasons why there is a Bill of Rights is to ensure that the market is competitive and that insurers are following ethical practices.

Do all insurance companies charge a fee for early cancellations?

If you’re moving out of state or you want to save on your premiums by moving to another company, you need to request that your policy is canceled. Carrying two policies isn’t only a waste of money, it is also a violation of your contract. Before you put the cancellation request in writing, know that you could pay a fee for ending the term.

Even though a majority of states allow cancellation fees, not all insurance companies charge the customers a fee for exercising their rate to cancel their policy. You need to check with your state department of insurance and then ask around to find out which carriers don’t levy a fee. These are the carriers to consider as you get auto quotes.

Look Through Your Contract

AdobeStock_67377533-1600x1600

If you want to find out how much you’ll be charged to cancel your insurance, the best place to look is in your policy contract. The insuring agreement defines what’s covered, what’s not, and how the contract works. If the insurer doesn’t state that there’s a charge, it violates your rights to charge a fee.

As you’re skimming through your contract, you should look to see if it says that the company will issue you a short-rated refund or a pro-rated refund. If the contract says that you’ll receive a short-rated refund, it means that a fee will be deducted from the refund of your unearned premiums.

How much is the typical cancellation fee?

A cancellation fee is called a short-rate fee. The actual amount that you are charged will depend on the way the fee is calculated. Some carriers charge a fixed fee that ranges between $20 and $50. This is an administrative fee that covers the cost to process everything.

Other carriers charge you a fee based on how much time is left on the policy. You will find that the contract says that you’ll be charged a percentage of the premiums that have yet to be earned. If you are nearing the end of the contract, the fee will be smaller than it would if you just activated the policy.

Will the company waive the fee?

AdobeStock_62082716-1600x1600

Sometimes, you no longer need auto insurance. If you aren’t canceling your insurance to move to another carrier, there may be a chance that the carrier will waive your fee. You may need to provide proof that you sold your car or surrendered your license before the fee will be removed from your final billing statement.

Ending your contract can cost you money. This is why you need to do your research when you’re comparison shopping for lower rates. An effective way to get several quotes at once is to use an online rate comparison tool. Once you get quotes, find out if you’ll still save money after you pay your cancellation fee and then make a decision.

If you need a new car insurance policy, shop around first. Use our free search tool to compare quotes today!

Compare Insurance Quotes!

Compare Quotes from Top Companies and Save

 Secured with SHA-256 Encryption