Changing Car Insurance Mid Policy (is it possible?)

Changing car insurance mid policy is an option, though it is not always recommended. Some companies may charge you a fixed fee of $30-$50 to change your auto insurance mid policy, or a fee of 10% of what's left on your policy.

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UPDATED: Jun 2, 2022

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Written By: Laura BerryReviewed By: Joel OhmanUPDATED: Jun 2, 2022Fact Checked

Here's what you need to know...

  • Auto insurance policies last for either a six-month or a 12-month term
  • After the company underwrites the policy and the 60-day binding period has passed, the provider is bound to provide coverage at the price quoted for the remainder of the term
  • Insurance companies must prove a client violated the terms of their contract to terminate coverage in the middle of a term

You’re required by law to carry auto insurance, but since the insurance marketplace is a competitive one, you’re not required to buy your coverage from a specific carrier.

As long as the coverage is purchased from a company with an active license to do business in the state, the driver is complying with the law. This makes it possible to shop around and find the most affordable rates without being at risk of being fined.

If you’re not happy with your premiums, you may be thinking that it’s time to consider switching carriers, and that could leave you scratching your head and wondering… Can I switch my car insurance mid-policy? Yes, in fact, but there are some reasons to be put off by the fact that you have several months left in your term.

Think about the advantages and disadvantages of changing carriers before you take the leap and cancel your existing coverage.

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Why do auto insurance policies have terms?

When you buy a car insurance policy, you’ll be offered a term that lasts for either six months at a time or 12 months at a time. In the insurance industry, this length of time is referred to as the policy term.

The term is when the coverage is afforded and defines exactly when the coverage ends and how much is due.

One of the major purposes of setting a term is to guarantee the rates that a policyholder pays for coverage.

During the policy period, the rates will remain fixed unless the policyholder opts to make changes.

The insurance company can’t decide to raise premiums because of an accident or a violation until the term comes up for renewal and the risk is reassessed.

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What do you need to know about the 60-day binding period?

There are always exceptions to every rule. In the auto insurance industry, insurance carriers are afforded some protection when they first take on a policy.

Right after the application is received, the insurance provider is free to underwrite the risk and change premiums if they discover something new.

It’s also the company’s right to terminate coverage or backdate a rescission because the applicant wasn’t honest.

As long as the information is discovered within 60 days of the effective date, the company can order cancellation for any reason.

This is the only time that an insurer has the option to change their mind when it comes to providing coverage. As you shop for coverage, be reminded of this binding period.

Can a policyholder change their mind?

Insurers may be limited as to when they can change their minds, but policyholders are free to change their minds at any time.

In this sense, the consumer has the advantage because they know they have level rates but are also free to shop around.

If they find a premium that beats the one they’re currently paying, they are free to make the switch mid-term. While this is an option, it’s not always recommended.

Are there cancellation fees?

Some insurance companies are free to charge their policyholders a cancellation fee for terminating their coverage before the end of a term.

The state will prohibit exorbitant fees but tend to allow them so that the insurer is able to recoup administrative costs.

Charging a fee also helps the insurance company collect a portion of the unearned premiums that they already factored into the financial projections.

Talk to your current insurance provider and ask about cancellation requirements and potential penalties.

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How much will the cancellation fee cost you?

Fees vary from company to company. How long you have left in the term can also have an effect on how much of your refund the company will take.

If you’re canceling coverage because you’re no longer a vehicle owner or a licensed driver, the company may waive the fee.

If the company offers a prorated refund, you’ll get all of your unearned premiums back. Companies with short-rate policies will hold onto some of those unearned premiums.

Here are two different types of fees companies may charge:

  • Fixed Cancellation Fee – Some companies will charge a fixed penalty. This can range from $30 to $50 and may be based on the balance that you have left for the term.
  • Short-rated Percentage – If you’re not charged a fixed rate, the company may calculate the fee by taking a percentage of the unearned premiums. The fee is somewhere around 10 percent. If you have a balance of $510 left on the policy, your fee will be $51.

Remember, most states require you to carry auto insurance to drive legally. If you get pulled over and you can’t show proof of insurance, you could be in for hefty fines and possibly a license suspension.

In order to maintain continuous coverage, make sure you sign up for a new policy before canceling the policy you have now.

Can I just change my existing coverage without switching?

If you’re switching carriers to make changes to coverage, you may be able to keep your current coverage without taking the leap.

Here are some changes that you can make to a policy you’re already paying for:

  • You want to change your deductibles
  • You’d like to remove the lender and drop physical damage coverage after paying off a loan
  • You’d like to raise your liability limits
  • You’d like to remove a driver who no longer lives in your home
  • You’d like to add optional forms of coverage like UM or Medical Payments
  • You’d like to update your mileage or your usage after changing jobs
  • You’d like to add a new driver living in your home
  • You’d like to add a new car you purchased

If you’re not sure if your current provider offers the type of coverage you’d like to add, give them a call and speak to an insurance agent. Most of the major insurers offer the same basic insurance coverages, so it is likely your current company will have what you need.

Why are some auto insurance providers more expensive than others?

Auto insurance providers consider a variety of personal factors when setting your insurance premium. These include:

  • Age
  • Gender
  • Marital status
  • Driving record
  • Credit score
  • Location

However, each company weighs these factors a little differently. Some think having a clean driving record is the most important factor, while others might think your age is most important. This is why your rates will vary from one provider to another.

It’s worth noting that a few states have banned insurance companies from using credit-based insurance scores.

The cost of your premium will also vary based on the coverage limits and coverage options you choose to include in your policy. If you only buy liability insurance, you’ll pay a lower premium, but you won’t have much auto insurance coverage, and you could end up paying a lot out of pocket if you’re in an at-fault accident.

Remember, if you end up with a coverage gap, auto insurance providers might raise your premiums significantly.

If you feel like you’re paying too much with your current carrier but you’re not sure if you want to switch, ask if there are any auto insurance discounts that can be applied to your current car insurance policy. You may be paying more than you need to.

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How can you get the most affordable auto insurance premiums?

If you decide to update your current policy without canceling the coverage you have with your current insurance company, it’s still wise to shop around. You never know which company might give you a better rate based on the new rating factors in your policy.

The only way to really find a company that’s competitive in your segment of the market is to actively review rate quotes from multiple auto insurance companies.

The most effective way to review insurance quotes is to use an online comparison shopping tool. You can either request quotes through each carrier directly or request multiple quotes at once through a single platform.

Using a single platform is the best method for people who value their time and who like to research.

Get accurate price comparisons today and save time on a mission to save money.

Enter your ZIP code in our FREE tool below to start comparing rates now!

Editorial Guidelines: We are a free online resource for anyone interested in learning more about auto insurance. Our goal is to be an objective, third-party resource for everything auto insurance related. We update our site regularly, and all content is reviewed by auto insurance experts.

A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP® Joel Ohman

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