Good question. All the rhetoric you’re probably getting from your broker or from the insurance company might make it seem like it would be difficult or even impossible to cancel your auto insurance policy halfway through the policy term. However, this is simply not true. You can cancel your auto insurance policy at any time and for any reason (after following certain procedures). Premium refunds are also issued with certain restrictions.
Let me explain. While the cancellation policy will depend largely on your insurer, there are some guidelines that most insurance companies follow. If the insured opts to cancel the policy, no prior notice is required; they just have to let the insurer know that they wish to cancel the policy.
This is all very reasonable and easy. The problem comes during the premium refund phase of the process.
When it’s the insurance company that decides to terminate the policy, they issue a premium refund on a pro rata basis. That means they’ll return you the premium proportional to the duration of the policy that you left unused. However, when the insured decides to cancel the policy, the premium refund is done on a short rate basis. They will return you the pro rate minus some administrative costs to ensure they recoup some of their initial investment.
Other than that, you can cancel whenever you like, for whatever reason you like. Don’t let the rhetoric scare you!