Car Insurance Refunds. Everything You Need To Know
Car insurance refund overview
You may be due a car insurance refund and require this information if you changed your car insurance policy, decide to cancel your policy, or if your insurance agent has cancelled or renewed your policy.
In this article, we will cover everything you need to know about car insurance refunds.
Do you get a refund if you cancel car insurance?
In short, yes, you will usually get a refund if you cancel your car insurance. However, there are some exceptions to consider.
Receiving a car insurance refund largely depends on the reasons for cancelling your policy and how much of the premium has been paid in advance.
If you pay your premium in full and upfront, you’ll usually get a refund when you cancel your policy. For example, if you paid your premium in advance and cancelled your car insurance before your policy ends, you may receive a refund. However, if you pay your premium monthly, you may or may not get a refund, depending on when you cancel.
For another example, you may also be issued a refund if your insurer cancels your policy and you’ve paid your premium in advance. In these cases, the premium is one of the deciding factors.
To go into this in more depth, here are a few more cases when you may qualify for a refund:
Switching insurance companies
As is often the case with refunds for car insurance, you may want to cancel your existing policy if you find better rates with a different insurer.
In this case, a refund will be issued when you switch insurers. However, depending on your insurer and current policy, you may have to pay a cancellation fee.
Sometimes, if you move homes, your insurer will cancel your old policy and issue you a new one. In this case, you may receive a new premium altogether.
Where you live affects insurance premium rates, so you may get a different rate on your new policy. In this case, if you move somewhere the rates are cheaper, you may qualify for a partial refund of your insurance premium.
Selling your car
If you no longer need coverage and sell your car, you may be eligible for a refund if your policy is cancelled before the end of your term. In this case, remember to note, you may have to pay a cancellation fee.
If minor or major changes are made to your policy, you might also qualify for a refund. Depending on your insurer, however, you may receive a credit on your account instead of a refund.
Changes you may make to your policy include removing coverage. You may no longer need certain types of coverage and choose to remove these from your policy.
For example, you may drop comprehensive and collision coverage, especially if you don’t have an auto loan and your vehicle isn’t worth as much as the coverage itself.
Decreasing policy limits
Higher insurance coverage limits usually result in higher premiums, so if you reduce the amount of coverage you have, you may be eligible for a refund.
Removing a vehicle
If you have more than one car on your policy and choose to remove one, your insurance rates will typically decrease which could result in a refund.
How does your payment schedule affect your car insurance refund?
Billing is much simpler to understand when car insurance is paid in full. It isn’t necessary, but it can make the billing process smoother. The further in advance premiums are paid, the more likely you will get a refund on your insurance premium.
As mentioned earlier, if you or your car insurance company chooses to cancel your insurance, you typically won’t receive a refund of car insurance unless you’ve paid the premium in advance.
As an example, if your policy term is 12 months and you paid for the premium upfront for the entire term and you cancel your policy after only three months, you will be issued a refund on car insurance for the remaining nine months.
But if you pay in monthly instalments and cancel your policy, you probably won’t receive a refund. However, if you cancel your policy in the middle of the billing cycle, then you may get a refund if you’ve paid your premium for an entire month.
If you pay on a month-to-month basis, the probability of getting a refund on your premium typically depends on cancelling your car insurance policy mid-billing cycle. Cancelling mid-cycle usually ensures your refund of car insurance eligibility.
It’s also important to note whether you pay monthly or upfront in full for your premium, you might be required to pay a cancellation fee when you cancel your policy. This fee is dependent on your policy and your insurance agent.
Will I get a check for my insurance refund?
Traditionally refunds were issued by check and sent by post, but you will find that most car insurance refunds are issued through the same payment method you use to pay for your insurance, as standard procedure.
If you pay for your premium with a check, you’ll likely receive your refund in the form of a check.
And the same goes for any other method of payment. If you pay with a credit card, you will receive your refund to that same account.
However, you may want to check the policy details to be sure, as the exact method for car insurance refunds varies.
Will I get a refund if the insurer cancels my policy?
Let’s look at this case in more detail. As mentioned previously, if the insurance company cancels your policy, you’ll usually receive a refund if you’ve paid your premium in full.
However, one exception to this rule is if they cancel the policy for non-payment, which is dependent on your billing cycle.
If non-payment occurs, you will continue to owe the insurer any unpaid premiums and will not receive a refund on car insurance.
As for the reasons why the insurer cancels your policy, there can be many. Some of those reasons include the number of accidents or tickets on your driving record, non-payments, and failing to pay your premium, for example.
All of the above factors will contribute to your eligibility for a refund of car insurance.
Insurance companies usually do not cancel policies, however, they typically renew a policy. If a driver has multiple accidents during the insurance term or is suspected of fraud, for example, the insurance company has the right not to renew its policy.
Is there a fee for cancelling car insurance?
As noted above, the fees for cancelling car insurance are typically dependent on your policy and your insurer. Those two combined will determine whether you will be charged for cancelling your car insurance.
A reliable customer who has held the same policy for a long time is less likely to face a fee than a new policyholder. If a fee is charged for cancelling, it will be subtracted from any refund amount due.
Understanding your car insurance billing system, and any fees that may apply to early policy cancellation can help you make decisions about your policy and insurer.
In order to avoid such problems like unexpected fees for cancelling car insurance, if possible, consider changing or cancelling your policy on your insurance renewal date.
To be eligible for a refunded insurance premium, if you paid in full, you shouldn’t be affected if you cancel your car insurance policy mid-term. You will not be charged for cancelling your car insurance if you have paid your premiums in full.
However, we don’t recommend cancelling your policy mid-term unless it’s totally necessary.
Lapses in coverage indicate higher risk, therefore, cancelling your insurance policy often results in higher rates, especially if you don’t have another policy in effect.
We only recommend cancelling your insurance policy if:
- You’ve already bought another policy with another insurer.
- You’re changing your vehicle.
- You’re moving to another country.
Whether or not insurance companies require you to pay a cancellation fee depends on their rules and the laws in the country you reside and drive in. You may sometimes be charged a non-refundable fee when you begin your term.
Some insurers will clearly state on their websites that they don’t charge a cancellation fee.
There is also one more exception to note. Some insurers may opt to short-rate your policy instead of charging you a fee for cancelling it. Therefore, the first part of your policy term will be priced at a higher rate due to set-up costs. As a result of this policy, you may get back less refund on car insurance than the total amount you initially paid.
How long will it take to get my car insurance refund?
On average, you can expect to wait approximately two to four weeks for your premium refund from an insurance company. However, this also depends on the insurer and your policy.
Your request to cancel a policy may have to pass through different departments before a return premium check is issued and your refund of car insurance is made.
The insurer may have an accounting period of up to 30 days’ notice of cancellation to offer a return premium and refund of car insurance, but this should be detailed in your policy.
To avoid any issues regarding this or any other scenario with car insurance refunds, we will cover some tips to avoid possible problems. Overall, as a general rule of thumb, you should always ask your car insurance agent for your refund criteria details.
Tips to Avoid Car Insurance Refund Problems
Here’s a summary of the factors to consider about car insurance refunds and our tips to avoid any issues.
1.Month by month basis
If you pay monthly, cancel your car insurance on your monthly payment due date to avoid issues. But ensure you check your policy and insurer’s terms and conditions.
2.Use your renewal date to make changes
You can avoid many car insurance refund issues by making changes on the day of your car insurance renewal to avoid issues. If you need to, cancel the auto insurance on your renewal date. Using your renewal date ensures you won’t be charged unnecessary fees.
3.Add your new car
If you sell your car or buy a new one, you’ll still need auto insurance coverage by law. Make sure you add the new car to your policy, so you have the coverage you need.
Before you cancel auto insurance coverage to receive your refund of car insurance, check your policy’s terms and conditions regarding cancellations. Remember that some insurers may charge a cancellation fee that could offset your refund amount.
5.Know your policy
As above, check your policy’s terms and conditions. It’s good practice to have peace of mind by knowing your insurance agent’s rules and the possibility of refunds before you make any decisions. You can contact your insurers if you have any questions.
Car insurance cost
The average cost of car insurance is dependent on numerous factors. The following factors define the cost of car insurance:
- Personal details such as age: driving experience, and the area the driver lives
- Additional details: additional drivers (their age, their driving experience)
- Policy value: the value of the vehicle (in the case of comprehensive insurance)
- Vehicle details: the type of use of the vehicle (private, commercial)
- Type of insurance: third party, third party, fire and theft, fully comprehensive cover.
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