In a NutshellCan you get a refund on car insurance? Yes — if you cancel or make certain changes to your policy, you may be entitled to a refund that could put money in your pocket.
If you’ve paid for car insurance coverage that you don’t plan on using, there’s some good news: You may be eligible for a refund.
Moving or canceling your policy after selling your car may give you this option. You may also qualify for a refund if you’ve decided to switch insurance companies.
When can you get a car insurance refund?
There are different reasons for getting a car insurance refund, and the process may vary depending on your situation.
Policy cancellation is one scenario that may qualify you for a refund. You might cancel your policy because you want to end your coverage with your current provider before the policy expires.
You may also be seeking a refund for changes you’ve made in your policy coverage or limits. If you’ve made changes that reduce the cost of your policy, you may get some money back from your insurer.
Insurance companies typically sell coverage in six-month and one-year terms. If you cancel your policy early, you may be able to get a refund for the unused portion you’ve already paid.
Canceling your policy before it ends
When buying car insurance, you can make the entire payment upfront or opt for a monthly payment plan. When canceling your policy, your refund amount will vary depending on whether you’ve paid in full or with a monthly payment plan.
The critical thing to remember here is that you’re only refunded the money you’ve already paid. So, if you’re canceling a one-year policy halfway through and have paid for a full year of coverage upfront, you may get a sizable refund.
On the other hand, if you’re canceling a one-year policy but have been making monthly payments, your refund may be small. Let’s look at a couple of scenarios.
● Scenario: You have a one-year, $1,200 car insurance policy. You’ve paid in full and are canceling after four and a half months of coverage.
● Outcome: When canceling your car insurance, you may be eligible for a refund of the unused portion you’ve already paid. In this example, you’ve paid for a year’s worth of coverage and are canceling after four and a half months. That means you’re entitled to a refund on seven and a half months of coverage, which works out to $750.
● Scenario: You have a one-year, $1,200 car insurance policy. You’re making monthly payments and are canceling after four and a half months of coverage.
● Outcome: With monthly payments, you typically pay for an entire month of coverage at the start of the month. In this example, you’ve paid for five months of coverage and are canceling after four and a half months. That means you may be entitled to a refund of half your monthly payment, which totals $50.
Making a change to your policy
You may be eligible for a refund if you change your policy to reduce the cost of your coverage.
These changes could involve reducing your policy limit and the number of vehicles or drivers covered. For example, you may choose to remove a teen driver from your policy, or you may opt to drop comprehensive and collision coverage on an older car.
Your insurer cancels your policy
Will you get a refund if your insurer cancels your policy? It depends on the reason for the cancellation.
Suppose an insurance company terminates your policy for nonpayment. In that case, you probably won’t get any money back since this type of cancellation usually happens when you’re past due on your payments. In this situation, you’ll continue to owe your insurer past-due premiums after cancellation.
There are other reasons for an insurer canceling your policy. For example, an insurance provider may terminate your coverage if recent tickets or accidents change your risk profile.
An insurance company may also cancel if you get a DUI conviction. If the insurer cancels your policy for a reason other than nonpayment, you may be entitled to a refund if you’ve already paid for coverage that you won’t use.
How to get a car insurance refund
So what steps do you need to follow to get a car insurance refund? The exact process can vary by insurer. In some cases, a simple phone call will suffice.
For example, Geico allows you to cancel your insurance by phone. You’ll need to provide your Geico policy number, so be sure to have it ready.
State Farm also allows you to cancel your coverage by phone. You’ll typically need to provide your policy number, name and date of birth. If you’re ending your auto insurance because you’ve sold your car, you may also need to provide a bill of sale or proof of your vehicle’s plate forfeiture.
If you’re switching to a different insurer, State Farm may ask for your new provider’s name, your new policy number and the effective date of your coverage. If you prefer, you can cancel your State Farm coverage by mail or in person, but you’ll need to provide the same information.
Allstate requests that you call your agent to cancel your policy and may ask you to submit a written request for cancellation.
Is there a fee for canceling my auto insurance policy?
With some insurers, there is no fee for canceling your auto insurance policy. For example, Geico doesn’t charge a fee for early cancellation.
But with some insurers, you’ll have to pay a fee for cancellation. This fee is sometimes called a short-rate penalty, and the exact amount depends on the insurer’s rules.
Calling your insurance provider is the best way to know if the company charges a fee for cancellation.
If you’re canceling your policy and intend to continue driving, replace your coverage before ending your current insurance plan. Once you have the effective date of your new plan, you can choose a cancellation date for your existing insurance that doesn’t leave any gaps in coverage.
Remember that even a small coverage gap could leave you liable in an ill-timed accident. And a coverage gap could also cause you to face higher premiums in the future.