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Should I Cancel My Car Insurance or Adjust My Policy?

Publish Date: October 2015

Before you pick up the phone to cancel your auto insurance policy, take a minute to make sure that cancellation is the right decision.

A gap in your car insurance, even if it’s only for a few days, may cause problems for you down the road. That's because periods with no auto insurance could flag you as a higher risk and you may pay higher premiums in the future.

So, when is it OK to completely cancel — or not renew — your policy? And, what are some other situations when it might make sense to simply adjust your coverage? Here are four common situations that may affect your insurance:

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Selling Your Car… And Not Replacing It

Maybe you're moving to an urban area and planning to rely solely on public transportation. Or maybe you’re simply reducing the number of family vehicles. Either way, if you're getting rid of a vehicle for good, it makes sense to cancel its insurance policy.

Keep in mind that stopping payments may not result in your policy being canceled. You'll likely need to contact your insurer directly for that.

Jeanne Salvatore of the Insurance Information Institute recommends talking with your insurance agent to determine whether and when you're owed a refund if you should cancel the policy before the policy it expires.

Storing a Classic Car

If you aren’t going to be driving your classic car, you may be tempted to cancel the policy. Even though the car isn’t on the road, it could still be exposed to dangers, however, such as theft, falling objects or hail. Salvatore says you should strongly consider keeping comprehensive coverage to help protect your baby against unexpected mishaps.

“If you plan on only occasionally in a parade, ask your agent about a policy that allows for occasional driving,” says Salvatore. Ask your agent about an "exhibition auto" policy if you're only taking your classic car to shows and parades. Take note, however, that classic vehicles kept for racing likely are not covered under this type of policy.

Your Teen Is Heading to College

If your child will no longer be regularly driving the family vehicle:
When he moves off to college, talk to your agent about potentially adjusting the family policy. If his school is 100 or more miles away from where you keep the family vehicle, you might be able to get a discount on your policy, since he will be driving it less frequently.

If your child is leaving his own car at home:
If he has a car with a title in his own name but plans on keeping the vehicle at home, he'll likely need to keep his insurance policy in place. When he comes home to visit and drives his car, liability coverage is required. Additionally, comprehensive coverage may be required by the lender if he's still paying off the vehicle.

Your Car is Paid Off

Now that the title is in your name, you might be considering downgrading modifying your car insurance coverage.

Some coverages — like comprehensive and collision — may not be required after your car is paid off. (Drivers in most states are legally required to carry liability coverage.)

While liability can help pay for damages you cause to someone else, comprehensive and collision can help pay for damages to your own car. So, if you're thinking about dropping coverage, Salvatore cautions against a liability-only policy.

“If you only have liability, then you aren’t covered if (your car) is stolen or hit," she says. She recommends keeping collision and comprehensive coverage even after the final payment has been sent.

If you’re thinking about canceling your car insurance, give your agent a call first. By taking the time to talk over your situation and your options, you can be better informed to make the right decision for today and in the future.

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This content is for informational purposes only and may not be applicable to all situations.

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