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Are car insurance policies a contract, and can I cancel anytime?

The guidelines that direct the procedures for cancelling an automobile insurance policy are unique to each individual insurance company. If a policy is for a short period of time, such as thirty days or three months, its cancellation may not result in cancellation fees for you. Fees for cancellation, if applied by a company, will not necessarily cost you a lot of money. The general rule of thumb is that a cancellation fee will cost you around $50.00. It might be slightly higher, but it could be significantly less according to you contract. This amount will be billed to you after you have cancelled the contract. Many consumers believe that the cancellation of an automobile insurance policy works similarly to the cancellation of a cell phone contract. If you cancel a cell phone contract early, you are charged for the remaining months on your contract. This is not how cancelling a car insurance policy works. An insurance company cannot charge for premiums it did not accrue. 

Your insurance company is at an increased risk for loss when your automobile insurance policy is active and providing coverage. If you have an accident, it can potentially cost your insurance companies thousands upon thousands of dollars. However, if you choose to cancel your policy, an insurance company retains the legal right to collect unpaid policy fees, cancellation fees, or earned premiums as specified by your contract. An example: Mr. Jones pays $100.00 a month for a six month policy. If he chooses to cancel his contract, he is charged $5.00 for earned premiums, a $15.00 policy fee, and a $30.00 cancellation fee. This is a total of $50.00. The insurance company has the legal right to recoup this money from Mr. Jones. This is just an example of one of many possible situations. Each vehicle insurance provider is not going to charge a cancellation fee. Occasionally, you will have the option of paying the cancellation fee and/or policy fees in your initial purchase price for the policy. There will be no out of pocket expenses if you should choose to cancel your policy. According to the specifications of your contract, you might receive a refund from the company if you paid for money for days you were not covered. 

Each automobile insurance company has their own regulations and requirements regarding cancelling a policy. Your safest bet is to contact your insurance agent to inquire about the policies regarding cancellation and to ask for an estimation of these fees. There is no taboo for cancelling a policy in the middle of a term. If you find an insurer who has significantly lower rates, you can recoup the money you lost on cancellation fees over a number of months. You should never cease to consistently monitor what the market prices are for your particular policy. The easiest way to do this is through comparison shopping online. If cancelling one policy in favor of another will save you money, by all means, do so.



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