If you’ve decided that it’s time to switch car insurance carriers, or you’d like to cancel your car insurance altogether, you might be wondering whether or not you’re entitled to a refund. We’ve got you covered.
If You Paid In Advance, You Probably Will Be Refunded
It’s pretty easy, and common, to switch auto insurance mid-policy. Sometimes you’ve found a cheaper policy, or sometimes you’ve found an auto insurance policy that covers more. Whatever the case, you want to cancel your old insurance and begin the new—but you prepaid on your old insurance to save money. Uh-oh!
Don’t worry, typically if you’ve prepaid on your insurance policy, you’ll get a refund. It’s unlikely to be the entire amount that you prepaid, however. Your insurance company may prorate your refund—charge you for the portion of the year you were already covered, while refunding the remaining amount.
If you are paying by the month, you may get a refund prorated for the rest of the month; however, that amount might not outweigh any cancellation fees. Speaking of cancellation fees…
Be Aware Of Other Costs And Fees Associated With Cancelling
While you’ll probably get some money back on a prepaid policy, assuming that you have a large portion of the policy time period left, your car insurance company is likely to keep a little more than just a prorated amount.
Month-to-month auto insurance nearly always has cancellation fees; 6-month and 12-month prepaid options aren’t as likely to. That’s because month to month customers are more likely to switch policies, statistically speaking, and auto insurance companies discourage that.
You may also see an “administration fee” deducted from your refund; this is essentially just a fee for processing the cancellation.
Who Is Most Likely To Get A Refund?
Customers who fit the following criteria almost always get a partial refund:
- 6 or 12-month policy
- Prepaid
- Significant time (3+ months) remaining on the policy
If you only have a month or so remaining on your prepaid policy, your refund will likely go toward cancellation and administration fees. The same goes for monthly customers, as well.
You Can End Up Owing The Insurance Company
If you’re a month to month policy customer, or if you have very little time remaining on your prepaid policy, you may not get a refund… you may actually get another bill. Between cancellation fees and administration fees, and any other charges associated with canceling your policy, your refund may have been fully absorbed—and then some.
Talk To Your Agent Before Cancelling
If you are going to end up owing money on your current insurance policy due to cancelling, that bill might outweigh the discounts (or other reasons) that you chose to switch for. You may be better off just waiting for your current policy to finish up before you switch. But it’s difficult to know for sure.
Your original car insurance policy paperwork should have some information in the policy regarding cancellation. This will at least tell you if there is a cancellation fee and how any remaining refund is calculated. However, it may not include all of the costs of cancellation, like the administration fee.
The best thing to do if you’re planning to cancel is to do it through your agent. It’s better if you’re getting a refund because it will process quickly and with no issues. And if you’re not getting a refund, your agent can let you know, and you can weigh the pros and cons of switching before your current policy is finished.