Letting your insurance coverage expire as a cost-saving measure may be tempting, but in the end it may cost you more. You might have extra time for coverage if you let it lapse and look for other insurance. Maybe you don't want to think about canceling or don't have the time. Or you could feel like you want to tell the insurance company to kiss your premium good-bye. Regardless, there are times to let your coverage expire carefully.
You might have a reason to let your health insurance expire. A certain grace period applies before the company cancels the policy, usually 30 days. This gives you time to reconsider canceling or search for other health coverage. In the meantime, you remain covered. Simply stop making premium payments on your health insurance policy or cancel your automated payment through your bank without notifying the health insurance company. You might change your mind during the grace period and simply make a payment before the cancellation occurs. Or you might find better health insurance. In the end, however, you will want to stay insured. Canceling your health insurance works if you already have another coverage plan.
If you have your car in the repair shop for an extended period of time or your car just can't be driven until you can fix it or get a new one, you can let your auto insurance expire. You remain insured until the expiration of your policy. This may come in handy if for some reason you suddenly discover you can drive your car, which is still insured. Maybe it gets repaired sooner than you thought. Canceling the policy would not allow you that opportunity, because you're not insured. However, you might get a partial refund if you cancel the policy instead; it depends on when you cancel. You might cancel early in the month, so you could be entitled to a refund on the premium you paid. You just have to make sure you don't drive the car without insurance.
Letting your policy expire on your auto insurance may cause problems. State laws vary when you drive your car without insurance. You could receive a huge fine or have your driver's license suspended. In some states, you can be put in jail if caught driving without auto insurance. Insurance also varies state to state with abandoned vehicles. Some states still require insurance even if you don't use the car. You may have to turn in your registration and get a new one when your car is ready, meaning there will be fees to pay. Simply failing to pay on your auto insurance policy rather than canceling will have a negative impact on your credit report. It will make it harder for you to find another carrier and also could raise your rates. If for some reason you drive the uninsured car and incur damage, that will take money out of your pocket.
When You Do Cancel
Consider the risks of canceling insurance. Canceling health or auto insurance is only a good idea if you’re getting another policy. Allowing insurance to lapse has its consequences if you don’t have a new policy lined up. You simply don’t want to go without heath or car insurance, just as you wouldn’t go without insuring your home. If you talk to a customer service representative about canceling insurance, take down the confirmation number and the rep's name in case there are any problems with the cancellation date. Ask about refunds when canceling your auto insurance. You might be entitled to money back if you cancel at the beginning of your term.
- Thinkstock Images/Comstock/Getty Images
- What Does $500/$1500 Deductible Mean?
- How to Get Additional Flood Insurance
- Definition of Out-of-Pocket Maximum & Deductible
- Can a Homeowners Insurance Policy Refuse to Pay the Full Amount?
- What Happens if You Get an Escrow Check That Is Too Much?
- What Happens If an Escrow Account Becomes Negative?
- Embedded Vs. Non Embedded Health Insurance Policy
- How Much Should You Save Before Starting a Family?
- What to Expect When Buying a Homeowner Insurance Policy
- What Are the Benefits of a Personal Umbrella Insurance Policy?