Many people are constantly looking for ways to save money on their auto insurance coverage. Auto insurance is designed to protect you while you travel around. Perhaps you are involved in an accident, or someone breaks into your car. Auto insurance covers you in those situations. However, meeting your monthly premiums can be difficult because there are so many factors to consider, such as your age, marital status, and residence.
This may cause you to analyze policies to purchase one. Perhaps you plan to switch to another carrier and, as such, are thinking about canceling your policy. Before you go through with auto policy cancellation, consider the following aspects.
- Analyze Multiple Policies
Try to look around for auto insurance when your renewal date is approaching. This can help you avoid potential cancellation penalties. Canceling close to your renewal date allows for a smooth transition. Comparing rates gives you enough information to tell if you’re currently paying too much for your coverage.
When you’re assessing a policy, calculate the amount of money you’ll save on premiums through the duration of the entire policy. After that, subtract the figure from the cost of canceling your policy early. If there is a net positive for you, then canceling your policy is an option. Shopping around for coverage is a great way to stay informed on the auto insurance market.
- Letting Your Policy Lapse
While you may be tempted to simply stop paying your premium, which could have serious consequences in the long run. This means your insurance carrier may cancel your policy, and other companies will view you as a high-risk driver, and this may cause your new carrier to raise your premiums.
- Cancellation Penalties
Auto policy cancellation could entail administrative costs and the loss of your premium. Insurance carriers set up coverage based on a 12-month span. Read over your policy to learn which fees you may be subject to if you decide to cancel your policy. Auto insurance carriers generally use the short rating and pro-rating to process auto insurance refunds.
Pro-rated cancellation allows you to receive the full amount of your unused premium. In contrast, short-rated cancellation takes a cut of the refund due to you canceling the policy early. Administrative fees are also often included in short rating refunds. Remember that you’ll likely pay more fees the earlier you decide to cancel your policy. Before canceling your policy, ask your carrier which refund method they use, so you’ll have a clear idea of how much money you could possibly lose.
- Getting a New Policy
Many insurance carriers require you to pay a down payment when you set up a new policy, and you will have to cover the costs upfront. Look over your policy to avoid having to deal with any hidden fees.
- Coverage Gaps
While you’re in the process of switching providers, make sure that you avoid a possible gap in coverage. The gap occurs when your old policy is canceled before your new policy starts. If you are pulled over while driving without insurance, you could face severe consequences.
Auto policy cancellation can help you save money but comes with a lot of risks. Look over your policy carefully, so you’ll have a clear idea of potential penalties and fees. Our insurance professionals at Family Financial Insurance Group will assist you if you have any questions.