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Q

If I buy car insurance from one company and then I find a cheaper rate like a month and a half later, can I cancel that and go with the cheaper insurance?


A

Probably you will be able to cancel your current car insurance policy, even after just a month and a half, as long as you can provide proof that you have obtained a new policy elsewhere. But it depends on your state's laws.

A few states may allow you to cancel at any time, while most states have laws in place that limit a policy's cancellation -- either by the insurance company or policyholder -- so soon after its inception. Mostly that's because of state laws requiring all drivers to have coverage.

Usually there are rules that apply for the first 60 days of a new car insurance policy. There are exceptions to the rules, though, and normally that includes a provision that a policyholder can cancel if he has already purchased new auto insurance coverage elsewhere and can show proof.

For example, in Florida. the law (FL Statute 627.7295) says that an auto insurance policy cannot be cancelled by the insured during the first two months (60 days) immediately following the effective date of the policy/binder, unless:

  1. the vehicle is declared a "total loss,"
  2. the insured no longer owns the vehicle, or
  3. the insured obtained replacement coverage with another company and then provides the first company with proof of the new coverage.

According to Florida car insurance law, if the policyholder wishes to cancel or replace a policy in the first 60 days, he will need to make a request in writing to the company and submit proof of eligibility under parts 1, 2, or 3 above.

Other states have similar laws. Some states with mandatory insurance laws require proof of other coverage or proof that there is no insurable interest (you sold the car, moved it out of state, destroyed it, etc.), in order to cancel within a certain amount of time, typically 60 days as in Florida.

Before canceling with your current car insurance carrier, you will need to get your new insurance policy set up. You may first want to check with your state's insurance regulator to find out what your state's laws are for policyholders canceling their policy during the first few months after its inception. And your new insurer's customer service department can tell you if they allow you to change companies and how to legally go about it.

In most cases to cancel your policy, you must make this request in writing. It is also possible that you will need to provide additional information (such as a copy of your new policy) and may be subject to an early cancellation fee. Some states have pro-rated cancellation refunding setup.


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