Yes, your daughter should be able to take car insurance off of her car while she is away at school, as long as she follows state laws.
In most states, if your daughter decides to take auto insurance off of her car, she also would need to turn in her registration and plates to the local Department of Motor Vehicles (DMV). If she fails to do so, they may penalize her for a lapse in car insurance while her registration is still valid.
In a few states, a car owner can sign up with the DMV for a planned non-operation period and basically suspend their registration and car insurance for a certain period of time.
If your daughter is able to do this in your state, then when she returned and wanted to drive, both registration and auto insurance would need to be started up again.
Without insurance on it, your daughter's car should be located somewhere safe since she would not have any Collision or Comprehensive coverage to pay for it if someone hit the car or stole it.
Also, if her car is financed, then her lienholder will require full coverage to stay on the vehicle whether it is driven or not while she is away at school.
Before canceling her car insurance policy, your daughter should talk to her car insurance agent to find out how much she would be saving by taking insurance off.
Your daughter may find that with extra costs she'll encounter for having a gap in coverage, and the hassle of taking registration off and then putting it back on, it is not worth it to drop her car insurance for the school year.