My Car Was Totaled, Should I Cancel My Insurance?
If you’re thinking about canceling your car insurance after your car is declared a total loss, you may want to think again. Read on to find out why.
Written by Sarah Gray
Reviewed by Amy Bobinger
If your car is declared a total loss, you’ll probably be wondering if you can cancel your
car insurance
. The short answer is yes—but there are a few things you need to consider before you do.- Even if your car is declared a total loss, you should keep your insurance until your insurer finishes processing your claim.
- If you’re planning to get a new car, avoid letting your policy lapse—a break in coverage could lead to higher prices when you reinstate your insurance.
- If you’re not planning to own another vehicle, it may make sense to cancel your policy or get non-owner insurance.
- Even if your car is declared a total loss, you should keep your insurance until your insurer finishes processing your claim.
- If you’re planning to get a new car, avoid letting your policy lapse—a break in coverage could lead to higher prices when you reinstate your insurance.
- If you’re not planning to own another vehicle, it may make sense to cancel your policy or get non-owner insurance.
Should you cancel car insurance if your car was totaled?
You should keep your car insurance policy in place at least until your claim is finalized. Once your claim is complete, your answer depends on whether you intend to buy a new vehicle or not.
- If you plan to go carless, taking advantage of public transit,rideshares, bikes, or your own two feet—cancel away.
- If you plan to buy a new vehicle, it may make more sense to simply remove the totaled car andtransfer insurance to your new carrather than canceling your current policy.
The key thing to consider here is whether or not the totaled vehicle is still registered in your name. In almost every state, so long as you have a vehicle registered in your name, you’re legally required to carry at least minimum
liability coverage
to remain in accordance with the minimum car insurance required in your state
.Allowing your policy to lapse for even a day can result in significant increases in insurance rates, not to mention lapse penalties. If you have a car registered in your name, and you’re uninsured, you could be looking at driver’s license and/or registration suspension, civil fines, and
SR-22
requirements—all of which spell a lot of hassle, and a lot of out-of-pocket expenses.RECOMMENDED
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When does canceling your car insurance policy make sense?
If you have no intention of owning a vehicle or driving a car, it makes sense to cancel your car insurance. In pretty much any other situation, canceling car insurance only makes sense if you’re
switching car insurance companies
, and your new policy takes effect before your old one expires.Let’s take a closer look at a few situation in which it makes sense to cancel your car insurance policy:
When you move
If you’re moving to a new state where your current provider doesn’t offer coverage, you will have to cancel your policy and find a new one. Remember, your new policy should take effect before your old one ends to avoid a lapse in coverage.
However, you also want to avoid having your policies overlap, since that could lead one or both insurers to dispute the need to pay out if you get into a collision. To avoid this, let your old insurer know the date that your policy will start with your new insurer.
Also, if you’re moving to a new state, be sure to check with the DMV and your new insurance company to be sure you won’t have a lapse in the validity of your plates or vehicle registration. You can also ask about the process of registering your vehicle in your new state.
When you’re looking for a better deal
Contrary to popular belief, sticking with the same provider for years on end isn’t necessarily the best way to ensure you’ve got the best deal on coverage. In fact, experts recommend
shopping for car insurance every six months
to make sure you’ve always got the best policy at the best price. When you’re looking for a better deal, be sure to compare car insurance quotes
from at least three to five providers before settling on a policy.If you want to reduce your coverage
Most lenders and leasing companies will require you to carry
full coverage car insurance
for as long as you still owe money on your vehicle. You’ll also typically be required to maintain a minimum liability of $100,000 per person, $300,000 per accident, and $50,000 for property damage.These limits can not be reduced while your lease is active. However, once you own your car outright, you have the option to
drop full coverage on your car
.Switching providers may be a good way to save money on car insurance. Keep in mind, dropping
collision coverage
and/or comprehensive coverage
may save you some money on insurance premiums, but it will also leave you holding the bill for your repairs if you’re at fault in an accident.When you don’t have a car
Like we mentioned above, if you don’t have a car and you have no intention of driving, then there’s no need to carry insurance.
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Even if you don’t currently have a vehicle registered in your name, it may make more sense to keep your policy active than to cancel it. Let’s consider some of the situations when you should maintain your policy:
If you’ll be driving any vehicle
Just because you don’t own a vehicle doesn’t mean you won’t be driving. If you frequently drive
rental cars
or borrow vehicles from friends, getting non-owner car insurance
, or non-drivers insurance, makes sense. With a non-owner policy, you’ll have liability coverage that follows you no matter what you’re driving.When you move
Just because you cross state lines doesn’t mean you have to change your insurance provider. Before you cancel your coverage, check with your provider to see if they offer coverage in the state you’re moving to. Your policy premiums will likely change, and you may be required to choose a new insurance agent, but you could remain with the same provider.
When you experience life changes
Getting married or divorced does not automatically signal the need to cancel your current coverage. You may be able to get a better deal simply by
adding a spouse to your insurance
or removing your ex from your car insurance after a divorce
. If you still own a car but will not be driving
Some insurance providers allow you to suspend coverage if you won’t be driving your vehicle for an extended period of time. Even if your provider does allow a suspension, be sure to check with your state’s department of motor vehicles (DMV) to see if your state laws allow suspension.
When you’re looking for a better deal
We know—we listed this as a reason to cancel your policy. However, we can’t emphasize enough the importance of keeping your policy current as long as you have a vehicle registered to you. Plus, your provider may have
car insurance discounts
available you don’t know about. Before you cancel or switch policies, check with your current provider and compare quotes with a few other insurance companies to see if you can lower the rates you currently have.Will canceling your insurance policy after a total loss cancel an insurance claim?
As long as you filed your claim while your policy was still active, no—canceling your policy won’t cancel your claim. However, keep in mind that until your claim is completed, the car will still be registered in your name. That means that canceling your policy will result in that dreaded lapse in coverage we already mentioned.
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FAQs
What happens to your car insurance policy after a total loss?
Like so much to do with car insurance, it depends. If you were at fault in an auto accident, you should expect your auto policy premiums to increase. In fact, they may increase even if you weren’t at fault—especially if your car was declared totaled in a comprehensive car insurance claim.
When it comes to your coverage, your provider generally won’t (and can’t) make changes to your policy without your express permission. That means your current coverage selections will likely remain in effect until you change them or cancel them.
Will auto insurance pay off my car loan if my car is totaled?
It depends. If your vehicle’s actual cash value (ACV) is equal to or greater than the amount paid out by your policy (or the at-fault party’s policy), then your collision or comprehensive claim payout, or the at-fault driver’s liability insurance will cover the balance of your
car loan
.However, if the value of your car is less than the balance of your loan, you’ll have to pay the difference unless you carry
gap insurance
. If your policy does include gap coverage, it will pay the difference between the value of your vehicle and the amount you owe on your loan, and it may even cover your deductible.
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