You’re not bound to a single insurance company for life. You can cancel an insurance policy, whether it’s because you don’t require the coverage anymore, you’ve found better rates, or you simply don’t like the customer service you were provided. Generally, we recommend changing insurers at renewal time to minimize the financial impact. However, you can cancel at any time – just know that your refund may be prorated or short-rated.
How do I cancel an insurance policy I’ve already paid for?
Contact your broker if you’d like to cancel your insurance policy. You can also contact the insurer directly in some cases, but it’s always a good idea to discuss changes with your broker so that you are confident you’re making the best decision.
You are generally required to send written notice to your insurance broker and insurance company. This is normally a cancellation form where your signature will be required. You’ll also need to provide the date you would like to cancel your coverage by. Your broker can help with this paperwork.
Now, what about the premiums you’ve already paid?
Your Refund
If you’ve already paid for your insurance annually, most insurance companies will refund the unused portion of the money that you paid. Your home insurance is generally prorated while car insurance is short-rated. This means your refund will be based on the timing of your cancellation. They’re all based on the annual premium and charged for the time on risk or time you were insured.
Another way of thinking about it is that a refund will be the time that you were insured minus the amount you actually paid.
Cancellation of Pre-Authorized Payments
If you pay using a pre-authorized payment, future payments will be stopped and the insurance company will no longer auto debit your account. The cancellation will take effective the date you provided for your written request.
Keep in mind that the insurance company needs time to process your cancellation request. If you pay monthly and the request is submitted too close to your next payment due, it may not be processed in time to stop the next debit from your account. Be prepared for an extra payment just in case . If you made a payment after the cancellation date you will get a refund once the cancellation is processed.
Possible Deductions
Bear in mind that there are certain factors that may affect how much you’re refunded. For example depending on the terms and conditions in your policy you may be charged an administrative fee. Or you may be charged a cancellation penalty. Where applicable these amounts would be deducted from the refund amount that would ordinarily be due to you.
A Word of Caution
Before you cancel an existing insurance policy make sure that you have already arranged an alternative as necessary. You should never go without insurance for one day. And make sure that the cancellation makes financial sense for you. While you may have found cheaper premiums elsewhere you need to ensure that the coverage is comparable or better than what you previously had. There is no point in switching to a lower premium policy that offers less coverage than you need. Regardless of the reason you may want to cancel your policy it’s always best to talk to your insurance broker before you do. Tell them what your concerns are and why you are considering cancelling – there may be something they can do to provide the coverage changes and/or price changes you need.
