[Template] How To Cancel Home and Car Insurance Anytime

When you realize you’re overpaying for insurance, have found a better price elsewhere, or have just had one too many frustrating experiences, you likely already have one foot out the door. But what’s holding you back from taking the final step and cancelling your insurance policy?

For many, it’s the common belief that you have to wait until your policy expires to cancel. In reality, the truth is that you can cancel home/car insurance and switch providers anytime. 

But just because you can, does it mean you should? Keep in mind that cancelling early typically comes with a fee or penalty. Whether that cost outweighs the potential benefits of switching is something you need to decide. 

This article can help you get there, though, as you’ll find the typical fee for cancelling insurance and how to calculate your total cost so that you can then assess whether it makes sense to switch now or wait. Plus, if you decide that cancelling and moving to an alternative provider, like YouSet, is the right move, you’ll find a sample cancellation letter template that you can use to get the process started.

Key takeaways

Cancelling your home or auto insurance early usually comes with a fee, but switching providers could save you money in the long run. If you cancel during your renewal period, however, you can typically do so without penalties. If you need to submit a cancellation letter, you can use the template below.

Sample cancellation letter template

If you decide that the benefits of switching providers outweigh the potential cancellation fees and you’re ready to proceed, your insurance provider may ask you to write a cancellation letter. Not to worry, it’s easy to do, especially if you use this cancellation letter template. Simply copy and paste the text below, fill in the blanks, save it as a document, and send it back.

[Your Name]
[Your Full Address]
[Your Phone Number]
[Your Email Address]rnrn[Today’s Date]rnrn[Insurance Company/Broker Name]
[Insurance Company/Broker Full Address]rnrnDear [Insurance Company/Broker Name],rnrnMy name is [Your Name] and I am writing to request the cancellation of my [home/car/condo/tenant] insurance policy, effective as of [desired cancellation date]. My policy number is [Your Policy Number].rnrnPlease confirm that you have received this cancellation request and provide me with any details regarding any refunds or remaining payments.rnrnSincerely,
[Your Name]

How much does it cost to cancel an insurance policy?

“Cancellation fees are common, but they’re usually predictable and capped,” says Channelle Cote, AMF- and RIBO-licensed insurance broker at YouSet. In Canada, it typically costs between 2% and 15% of your annual premium to cancel a home or car insurance policy. For instance, cancelling an $800 insurance policy early could cost you anywhere from $16 to $120. 

Generally speaking, the earlier you cancel your policy, the higher the fee will be, potentially up to 15% of your premium. However, this fee is typically capped at the equivalent of two months’ worth of payments. If you cancel later in the term, though, your fee will likely be lower. Always check your insurance policy documents, though, as the exact fees will vary based on your insurer and the terms of your policy.  

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Insurance cancellation fee formula

To estimate how much it will cost to cancel your insurance policy, start by reviewing your policy documents. You’ll need to find:

• Your annual premium amount
• Your policy’s expiration date
• Your policy’s cancellation fee structure (typically a percentage of your annual premium)
• Cancellation terms and conditions 

Once you have this information, use the following formula to estimate your cancellation fee:

Annual Premium Amount × Applicable Percentage = Cancellation Fee.

For example, let’s say your annual premium is $1,200, and your policy expires in December. If you decide to cancel in June, you’ll have 6 months remaining on your policy. If your insurer’s cancellation fee structure follows a tiered approach, with a 10% fee for cancellations made between 4-6 months, your estimated cancellation fee would be:  1,200 × 0.10 = 120  In this example, it would cost approximately $120 to cancel your policy early, assuming you follow the terms and conditions outlined in your policy. 

Can you cancel insurance without charges or penalties?

Yes, you can usually cancel home and car insurance without charges or penalties during the renewal period, which is often the last few weeks before your policy automatically renews. 

To avoid cancellation fees and ensure you’re not charged for the upcoming term, you’ll need to follow your insurer’s specific notification process. Some insurers require a written notice, while others may allow cancellations through your online customer account. Regardless, it’s important to notify them before your policy’s expiration date, rather than waiting until the exact day, as this can lead to complications.

Additionally, always ensure you have another insurance policy in place before cancelling, especially when insurance is mandatory, such as with car insurance or homes that are mortgaged, so you aren’t left vulnerable.

FAQs about cancelling insurance

What’s the easiest way to cancel car insurance without getting charged?

You can usually cancel car insurance during your renewal period, which is often the last few weeks before your policy automatically renews. In this time, you won’t get charged a fee. 

Is there a penalty to cancel insurance?

Cancelling insurance early typically comes with a penalty or fee, costing between 2% and 15% of your annual premium (usually capped at the equivalent of two months’ worth of payments). In general, the earlier you cancel your policy, the higher the fee will be. 

Why is it bad to cancel car insurance?

Cancelling car insurance can be bad if it creates a coverage gap. That can lead to higher premiums, make you financially liable for damages, and expose you to legal penalties. Not to mention, driving without car insurance is illegal in Canada.

Is it worth cancelling home or car insurance?

Cancelling home or car insurance entirely is rarely worth the risk of saving money, as it leaves you liable for financial losses, cancelled coverage, or higher future premiums. It’s only worth cancelling if you find a cheaper or better insurance policy for your needs, and can align the end date of your current coverage with the start of the new policy to avoid any lapses in coverage. 

Does cancelling home or car insurance affect your credit score?

Cancelling home or car insurance does not affect your credit score, even if it creates a coverage gap. The only time it will affect your credit is if you have an outstanding unpaid premium balance that is sent to collections.