Sometimes, you might find that your existing car insurance plan might not work for you. Moving, buying another vehicle or deciding to look for better prices on coverage might all merit reviewing your plan. Some people choose to update their existing coverage, while others
choose to terminate the plan in favor of another policy. If you cancel your plan, you don’t want to put yourself at risk of driving uninsured. Therefore, only take this step with caution.
Why Canceling a Plan is Risky
Most states require all registered drivers to have car insurance. Driving without it might lead to penalties such as a loss of driving privileges and fines. Cancelling your insurance usually means that you must buy another policy if you want to continue driving.
States require coverage often because they assign fault in vehicle accidents. This means that if you cause the wreck, then you have to pay for the damage. You will have to pay for your own costs and the costs of others involved, like another driver you rear-ended. If you don’t have car insurance, you don’t have the financial assistance to help you cover the costs of those situations. That might be a loss both to you and to the other parties involved.
The only reason not to re-enroll is if you plan to sell your car and give up driving altogether. However, if you plan to keep your license, you should still purchase a policy. Many insurers offer non-owner policies, which insure drivers when they drive someone else's car.
The Penalties of Canceling Your Plan
If you cancel your auto insurance plan, you need to only do so when you have bought another policy. This new policy must also meet the coverage requirements of your state.
Often, your new policy provider can contact the old one to tell them that you are switching. If not, then you might have to do so yourself. You can tell your old provider the date your new policy begins. They can then set the old policy to terminate at the time the new one begins.
Therefore, you won’t have any cost overlaps or confusion in coverage.
Sometimes, cancelling your old policy will result in a premium refund. If you have previously paid for your policy, then your insurer will likely refund you the portion of your premium that corresponds to the time that would have remained on your policy.
Usually, there is no cancellation fee to end your old policy. However, your new insurer might require a deposit or down payment (often your first month’s premium) upon enrollment. If you need the new coverage to start immediately, some insurers might assess a service fee, also. Therefore, it's often a good idea to set the start date of your new policy several weeks in advance.
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