Can You Get A Car Insurance Refund?

Written by:

Dash Lewis , Writer

Written by: Dash Lewis Content Writer

04/02/2024 09:12 PM

Key Points:

• You can typically cancel your insurance policy at any time, though you may incur an early cancellation fee that could chip away at any applicable refund.
• Refunds for policy cancellation will often be prorated or less the value of any coverage you’ve already received.
• Canceling your car insurance without adequate replacement coverage could result in fines or a seizure of your license plate.

If you’re thinking about canceling your insurance policy, you may be wondering if you can get a car insurance refund. This is one of the most frequently asked questions among car insurance customers. While some providers may offer partial reimbursements for any unused portions, many also charge a cancellation fee. 

Failing to maintain continuous car insurance can result in state fines and increased monthly premiums. In some cases, it’s a better idea to maintain insurance coverage than to cancel your policy briefly.

This article will help you decide if you should cancel and how to get an auto policy refund if you do. Our researchers have reviewed the best car insurance companies and carefully studied the practices of many top providers. If you’re thinking of switching providers, be sure to compare quotes from several competitors.

Can I Get A Car Insurance Refund?

Some providers will offer a car insurance refund if you cancel your policy. Your refund amount is likely to be prorated and will depend on when you cancel your policy. Many auto insurers charge a cancellation fee if you cancel before your policy term is up, so be sure to review your insurance contract for specific details.

Refund policies vary from provider to provider and from state to state. While many providers may not charge a direct cancellation fee, canceling your policy can still hurt you financially. For example, your insurer may change the way your rate is calculated if you cancel early (from a monthly rate to a more expensive daily rate). This is called a short rate cancellation and typically applies if you cancel your car insurance policy early in the contract term.

Should I Cancel My Car Insurance?

Typically, the best reasons to cancel your car insurance policy are if you switch providers for a better rate or no longer own a car. In most other cases, canceling your policy can cost you big down the road. 

Here are a few reasons you may cancel your car insurance:

• You move to another state: If you move to a different state, there is a good chance you’ll be able to maintain a policy with your current insurer. However, some insurers are only available in certain states. If you move to a state where your current car insurance provider does not operate, you should cancel your old policy once you’ve secured new coverage.
• You no longer have a car: If you don’t have a car, there’s no reason to maintain an insurance policy.
• Your car is not being used: If you have a car that isn’t being driven, you may not need an insurance policy, and it could be a good idea to cancel.
• You switch providers: Switching providers for lower rates can be a good reason to cancel your existing policy. Be sure that you set up your new policy before canceling your old one, as some states will penalize you for any gap in coverage.
• You travel abroad: If you plan to travel abroad for an extended period of time, you’ll need to house your car in a closed garage if you want to cancel your auto insurance policy. Be aware you may come back to higher car insurance premiums if you do this. One option is to declare your vehicle as planned non-operational (PNO). If you discuss this with your insurer, you may be able to maintain coverage at a highly reduced rate while you’re out of the country.

Factors To Consider Before Canceling Your Car Insurance

If your vehicle is registered with the state, you may be required to maintain a car insurance policy, even if nobody drives the car. If you’re switching policies, make sure you have a new insurance policy that goes into effect on the same date as your prior policy’s cancellation date.

If you’re no longer going to be driving the vehicle, make sure you garage it and cancel your registration before canceling your insurance policy. If you only plan to go without driving for a short period of time (less than three months), it’s likely better to continue coverage than to cancel and start a new policy. Coverage gaps can result in higher premiums when you decide to reinsure.

Always keep in mind that your coverage history will factor into future car insurance costs. A lapse in coverage may cause future auto insurance rates to increase. In general, it’s better to not renew your auto insurance policy than it is to cancel early for a small car insurance refund. Be sure to determine how much canceling early might cost you down the line and consider waiting to cancel your policy until the end of your current contract. In most cases, this will be six months to a year.

How To Cancel Your Car Insurance Policy

If you choose to cancel your car insurance policy, the first step is to call your insurance agent. Your agent will guide you through the rest of the process. Before canceling your insurance, however, be sure to carefully read and understand the cancellation policy as described in your insurance contract.

Some insurers may allow you to cancel policies online, but we highly recommend that you speak with an agent or company representative before canceling any insurance policy. Be sure you understand the consequences thoroughly beforehand.

Car Insurance Refunds: Our Take

In many cases, you’ll receive a car insurance refund if you cancel your policy early, though this is not guaranteed. Specifics can vary greatly between states and providers, so the best way to understand what will happen is to review cancellation policies with your insurance agent or a customer service representative.

If you’re canceling your policy because you’re interested in finding coverage elsewhere, consider comparing car insurance quotes from the providers below.

Our Recommendations For Car Insurance

If you’re looking for a car insurance refund because your premium is too high, you might want to change auto insurance companies. If this is the case, consider two of our top-rated insurers: USAA and Geico. Both companies offer low car insurance rates to drivers in every state.

USAA: Best For Military Members

USAA scored highly in our USAA auto insurance review at 4.5 out of 5.0 stars. USAA offers some of the lowest premiums in the country, in part because of its wide range of discount opportunities, such as:

• Military installation discount
• Annual mileage discount
• Defensive driving discount
• Good student discount
• Family discount
• New car discount

The only downside to USAA is that it’s only available to military members and those who have a parent or spouse with a USAA membership.

Geico: Best For Basic Coverage

Geico is also one of our highest-rated providers and offers low rates for most drivers. Unlike USAA, Geico insurance policies are available to everyone. Potential ways to save money on Geico policies include:

• Good student discount
• Good driver discount
• Safety device discount
• Multiple vehicle discount
• Federal employee discount

Customers report that the Geico claims process is quick and easy. The company received an A- rating from the Better Business Bureau and has an A++ financial strength rating from AM Best. Read our full Geico auto insurance review for more information.

If you’re not sure which provider would be best for you, compare Geico and USAA directly in our Geico vs. USAA review.

FAQ: Car Insurance Refunds

If you have questions about car insurance refunds, we have some fast answers for you below:

How We Rate Auto Insurance Providers

Our review team extensively researches auto insurance providers to deliver informed and unbiased assessments of leading companies. We evaluate several key rating factors that are important to consumers to determine which providers are the best in the industry:

• Reliability: It’s important that an auto insurer is able to meet its claims obligations. Companies with a strong financial strength rating from AM Best score best in this category. Established insurers with a long history of reliable service also receive positive marks.
• Availability: Insurance companies that offer wider availability to consumers in terms of state availability and few eligibility requirements are more likely to meet consumer needs.
• Coverage: To determine our coverage score, we look at the number of coverage options available as well as coverage limits and deductible options. Our ratings also take into account additional services and benefits like roadside assistance.
• Pricing: Cost can be difficult to compare between insurers because so many factors impact annual premiums. The cheapest insurer for one driver may not be the cheapest for another. To determine our cost score, we look at insurance rate estimates generated by Quadrant Information Services, discount opportunities, and consumer reports.
• Service: We comb through customer reviews on sites like the Better Business Bureau (BBB) to learn about customer experiences. Insurers with a low volume of complaints score well in this area. We also consider the claims process, giving higher ratings to car insurance providers that offer a smooth experience.
• Technology: Providers with an online quote tool, easy-to-use claims app and a usage-based insurance app score best in this category.

*Data accurate at time of publication.

Dash Lewis Content Writer