Even if you already paid for car insurance, you can cancel it anytime, and you may receive a refund for the amount of any pre-paid, unused premium.
Ways to get a car insurance refund
If you paid your premium in advance, you can get a refund when you cancel your policy, move to a state with lower rates or find a better rate with another company.
However, some insurance companies charge an early cancellation fee, which could reduce your refund, depending on the state you live in.
Cancel your policy
You might get a refund if you’ve paid your premium in advance and cancel your policy before the end of the term. Common reasons for doing this include:
- Finding a better rate with another company and switch policies.
- Moving to another state and your new policy has lower rates.
- Selling your car.
Change your policy
An insurer may issue a partial refund if you make changes to your policy that reduce the premium cost, including:
- Removing coverages from your policy.
- Reducing your coverage limits.
- Removing a driver from your policy.
Get dropped by your insurer
Finally, you may get a refund if an insurer drops your policy, often because something has happened to alter your risk profile, like causing an accident. This is usually a net-negative for the driver, because your new status as a “high-risk” driver is likely to get you a much higher rate.
Jerry insight:If your insurer cancels your policy because you’ve stopped making payments, you will not be eligible for a refund. In that case, you could also struggle to find affordable coverage in the future, as rates after an insurance lapse can get very steep.
How will your car insurance refund be paid?
If your insurance company approves your refund, you’ll generally receive it in the same way you made your initial payment.
That means if you paid by:
- Credit card: You’ll receive a credit on the same card.
- Electronic transfer: You’ll get a direct deposit to your bank account.
- Check: You’ll receive a check in the mail.
One exception: If you’re getting a refund because you made changes to your current insurance policy that caused your premium to be less than what you already paid, you’ll likely receive a credit against your next premium payment rather than a refund check.
Prorated refunds vs. short-rate cancellation fees
There are two primary types of cancellation refunds: prorate and short-rate cancellations.
While most insurance companies don’t charge cancellation fees, some do have “short-rate” policies. This means they’ll deduct administrative expenses from your refund before issuing it, reducing the amount you get back.
Companies that prorate refunds will pay customers the full unused portion of their insurance premium. For example, if you paid $2,400 for a 12-month policy upfront and canceled six months into the policy, a prorated refund would give you a $1,200 refund.
FAQ
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What do I need to do to get a refund from my insurance?
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What is the return premium in car insurance?
Megan Lee is an editor, writer, and SEO expert who specializes in insurance, personal finance, travel, and healthcare. She has been published in U.S. News & World Report, USA Today and elsewhere, and has spoken at conferences like that of NAFSA: Association of International Educators. Megan has built and directed remote content teams and editorial strategies for several websites, including NerdWallet. When she`s not crafting her next piece of content, Megan adventures around her Midwest home base where she likes to drink cortados, attend theme parties, ride her bike and cook Asian food.
Annie is a writer and editor at Jerry and has more than a decade of experience writing and editing digital content. Before joining Jerry, she was an assistant assigning editor at NerdWallet, where she covered loans. Previously, she worked at USAA and newspapers in Minnesota, North Dakota, California, and Texas. She holds a bachelor’s degree in journalism from the University of Minnesota.
Lacie Glover is a Lead Writer and Editor with sixteen years’ experience in the insurance category. Prior to Jerry, she spent more than a decade on NerdWallet’s content team writing, editing and then overseeing the auto insurance category, as well as dabbling in other insurance and automotive topics. Prior to her career in the online personal finance content space, Lacie spent time in the hard sciences, in clinical research and chemistry labs. She has a bachelor’s degree from Colorado State University.
