When you cancel auto insurance you face certain repercussions unless prior permission is granted by both your state’s Department of Motor Vehicles (DMV) and your auto insurance company. What are the rules and laws in each state when you cancel car insurance coverage? What are the specific ramifications when you cancel auto insurance without permission?

Minimum car insurance laws in some states prevent drivers from fully canceling auto insurance policies. States permitting drivers to cancel insurance policies require documented and qualified reasons. If you cancel your car insurance without permission or qualified reasons you might be subjected to high fines, license suspension and more.

Auto insurance companies also check your driving records and auto insurance records when you sign up for new policies.

An unwarranted lapse in coverage might cause you to pay higher insurance premiums for extended periods of time even if your previous driving and insurance record was clean.

Numerous benefits to canceling your car insurance coverage policies also exist.

For example, canceling certain coverages within your umbrella policy helps save you money. Many drivers are unaware it is not necessary to cancel your car insurance in its entirety when looking to save money on car insurance premiums. 

For example, your car, which was previously financed, is now paid off in full. Lenders require you to have full coverage while you are still paying off your car loan. Once your car is paid off in full you are able to cancel any elements of your car insurance coverage you no longer need within state laws. 

What happens if you discover a different auto insurance company offering you better terms and rates? It is legally permissible to cancel your current coverage and switch to a new auto insurance company to save money provided you do not let your coverage lapse while making the switch.