Can I get a refund if I switch auto insurance?

How do I get a refund on my car insurance? Whether you can get money back from car insurance depends on the fine print in your auto insurance policy. 

Generally, if you cancel before the end of your policy period, you should be able to get a refund for any unused coverage. 

However, every auto insurance company differs in what refunds it gives or any early cancellation fees it may charge. Make sure to read up on how to cancel your car insurance to avoid any major issues like hefty cancellation fees. 

For refund information, continue reading to learn how to get a car insurance refund, standard refund protocols, and more. 

How to Get a Car Insurance Refund After Canceling

There are several reasons you may choose to cancel, but there are a few differences regarding whether you cancel the policy yourself or your insurance company cancels it. We’ve outlined refunds for both situations below. 

You can usually just call your insurer and ask about the possibility of a refund when you cancel. You might also want to ask how the payment will be issued, as you may choose between a check or direct deposit. The insurer may just issue the refund to your original form of payment.

Refunds If You Cancel Your Policy 

Can I get a refund on my car insurance when I cancel? One of the more common reasons drivers ask about a refund discount on car insurance is because they canceled their auto insurance policy. Whether you receive a refund depends upon the following factors: 

• When the car insurance policy is canceled. If you cancel with less than a week of coverage left, you likely won’t get a refund.

• The company’s refund policy. Not all companies offer a refund. If yours doesn’t, it’s best to wait until the end of your policy period to switch coverage. 
• If there is a cancellation fee. Some companies charge a cancellation fee if you cancel mid-policy, which could reduce your refund or eliminate it altogether. 

For example, you may not receive a State Farm cancellation refund if the State Farm canceling policy fee is more than the refund. There is also a short rating to consider, where insurance companies charge more expensive rates at the beginning of a policy in order to offset set-up costs. 

If this is the case, you will receive less of a refund than you might expect after paying for the first few months of coverage. 

Let’s say you prepay for six months of coverage, and the company short-rates your policy. A larger sum will go towards the first few months, meaning that the rates you pay upfront won’t be divided evenly among the six months, so you will receive a lesser amount back. 

Payment in Full vs. Installments 

When it comes to refunds, it matters whether you paid in full for coverage or were paying installments each month. 

If you are paying in installments, you may not get a refund back unless you just paid for coverage and canceled a day or two later. With payment in full, you are more likely to get a car insurance down payment refund, as you prepaid for months of coverage ahead of time. 

Refunds if the Company Cancels Your Policy 

Can you get a refund on your car insurance if your insurance company cancels your policy? If your insurance company canceled your auto insurance policy, you should still be able to get a refund if you paid in full. 

For example, if you are deemed a high-risk driver after an accident and your insurance company drops you, you should be refunded. However, it is different if your insurance company cancels your policy due to nonpayment. 

In cases of cancellation due to nonpayment, you aren’t entitled to any refund from the insurance company, as you owe the insurance company money. 

Keep in mind that a company canceling your policy is different from nonrenewal. A nonrenewal will be if an insurance company chooses not to renew your policy at the end of your coverage. 

Let’s say you were in multiple accidents, and your insurance company decided you were too risky to insure. But because the company provided coverage for the duration of your paid policy period, it is under no obligation to give you a refund. 

Refunds for Policy Changes 

Although less common than refunds for cancellations, there are sometimes refunds if you make a change to your policy. If you have prepaid in full for coverage but then made a change to your coverage that reduces your rates, you should get a small refund as you will have a cheap auto insurance rate in the future.  

For example, removing a teenage driver from your policy saves you a few hundred in rates every year. You should get a few hundred back if you prepaid for the higher rates. 

Refunds for COVID-19 

Some auto insurance companies offered refunds to existing customers at the beginning of COVID-19, as drivers were staying at home and therefore at less risk of crashing. Discounts were also offered to new customers who joined and drove less due to COVID-19. However, there aren’t currently any promotional offers for refunds for car insurance. 

If you want to lower your auto insurance rates, see if your insurance company offers any other discounts. For example, you may qualify for a low mileage discount if you work from home and drive less after COVID-19.

The Final Word on Car Insurance Refunds 

In most cases, if you prepaid for car insurance coverage and chose to cancel your policy before it ends, you are entitled to a refund minus any cancellation fees. The exception would be if your auto insurance company canceled your policy for nonpayment, in which case you would owe them money. 

If you are looking to save money on auto insurance, the best thing you can do is shop around for quotes. You can use our free quote comparison tool to find a local auto insurance company that offers cheaper rates.