How to Get a Car Insurance Refund – Insurance Made Easy

How to Get a Car Insurance Refund, Let’s Get That Money Back in Your Pocket

You've moved to a new city, reduced your commute, or sold your old car. Life is full of changes that can affect many aspects of your life, including your auto insurance coverage requirements.

You may also need to cancel or switch policies if you sell a vehicle, or you may need to reduce your coverage if you drive fewer miles per year.

If you cancel your policy before the end of the term, your insurance company may owe you a car insurance refund. You can get a refund on unused car insurance as long as you've paid your premium in advance, which can be a nice financial boost to spend on other things.

However, whether you are eligible for a car insurance premium refund is dependent on a number of factors. As a result, understanding how car insurance reimbursements work is beneficial.

Continue reading for all the information you need to put that money back in your wallet!

Reasons for Canceling Your Auto Policy

There are several reasons why you might want to request a refund on your car insurance policy. Here are some of the most common eligibility criteria for policyholders.

You Cancel Your Policy

When you cancel your car insurance, do you get a refund? Most of the time, the answer is... yes.

If you've paid your premium in advance, the most common reason for receiving a car insurance refund on your policy is canceling before the end of the term. In fact, many states require car insurance companies to issue refunds when policies are canceled. You simply need to contact your insurer and wait for the refund.

Timing Is Everything

Most insurers allow you to cancel your policy at any time, but the amount of your refund is determined by when you cancel and how much you've already paid in. Here are a few scenarios to consider:

Premium deposits – When you purchase an insurance policy, your insurer may require you to put down a portion of your premium as a deposit. If you cancel your policy after a few weeks, your car insurance company will give you a partial refund to cover any unearned premiums. So, while you won't get a car insurance down payment refund, you won't lose the money because it was already applied to your auto insurance premium.
Choosing auto renewal – "Can I get a car insurance refund if I cancel after my policy automatically renews?" you may wonder. If your car insurance is set to renew automatically, you should be able to get a refund, but you may be charged a fee if you cancel after more than two weeks.
Keep it within the grace period – If your policy is about to expire, you'll need to act quickly if you want to cancel. After your policy goes into effect, your insurer will usually give you a grace period of about 20 days to pay or cancel. However, if you do neither during that time period, your insurer may drop you for nonpayment, making it more difficult for you to obtain insurance in the future.

What About After an Accident?

There are several ways to get a car insurance refund after an accident:

Repair reimbursement – First and foremost, if you file a claim for a car damage refund, your insurance company will reimburse you for all approved repair costs, less your deductible.
Deductible refund – If you were not at fault in the accident, your insurer will reimburse you for your deductible. Keep in mind that if you were at fault, your insurance rates could rise.
Rental reimbursement – If you purchased a car insurance policy that included rental reimbursement coverage, your insurer will reimburse you for any rental car expenses you incurred while your vehicle was being repaired.
After a write-off – If the cost of repairing your car exceeds the vehicle's value, your insurer may declare your vehicle totaled, or "written off." You may be eligible for a car write-off insurance refund depending on the extent of your damages. Instead of paying to repair your car, your insurer would refund you the value of the car after a write-off, less your deductible if you were at fault.

What if I Sell My Car?

When you sell a car, you must cancel your insurance policy. When the car is sold, you may be eligible for a car insurance refund. However, when selling the vehicle, you must consider what you will do with your car insurance refund.

If you intend to sell your car and purchase a new one, you will still require coverage. As a result, the car insurance refund you receive after selling your car will almost certainly have to go toward your new policy, which you should activate before canceling the old one to avoid a coverage lapse.

But suppose you've just moved to a walkable community with public transportation and don't intend to replace your car after you sell it. In that case, you might be able to keep your car insurance refund after you sell it.

You’ve Paid Off Your Car

GAP insurance, or Guaranteed Auto Protection, covers the difference between the vehicle's actual value and the loan balance. People who pay their GAP premium in advance may be entitled to a sizable GAP insurance refund when their car is paid off. If you pay off a five-year car loan in three years, for example, you can receive the equivalent of two years' worth of premiums from your car's GAP insurance refund.

Death of a Loved One

People rarely consider what happens to car insurance when someone dies until they have lost a loved one. If the policyholder's spouse or the person inheriting the vehicle has no plans to use it, they must cancel the policy and determine whether they are eligible for a car insurance refund following the death of their loved one. This may apply in situations involving certain impairing disabilities as well.

Auto Insurance Refunds for COVID-19 Reasons

COVID-19 has compelled more people to stay at home and avoid driving. Because fewer cars means fewer accidents, some insurers have offered a partial car insurance refund as a result of the pandemic. Following the start of the March 2020 coronavirus lockdowns, many auto insurers began offering policyholders rebates, discounts, and reimbursements. Because not all insurers provide this information, you may need to contact them to find out if any refunds or discounts are available.

If you can't afford to pay your premium, check to see if your state requires insurers to give policyholders more time to pay for their coverage. California, Massachusetts, and Michigan are among the states that have ordered auto insurance companies to provide refunds.

If you haven't been driving as much — or at all — because of COVID, you may be able to lower your rates even further by canceling any coverage you no longer require, suspending your policy, or shopping around with other providers.

If you need assistance finding a new insurance policy, our licensed agent can assist you.

Frequently Asked Questions on Getting Car Insurance Refunds

When will I be able to get a refund on my car insurance?

Here's a rundown of when and where you can and cannot get a refund.

When you CAN get a refund:

When you cancel your policy and have already paid for it.
When you make policy changes, such as removing a driver or vehicle.
When you remove coverage from a car on your policy.
When you relocate to a lower-cost area.

When you CAN’T get a refund:

When you fail to pay your insurance premiums.
When your insurance company cancels your policy due to too many accidents or too much risk.
When you violate your policy's terms.
When you cancel your policy without paying after the grace period has expired.

Is my refund taxable?

Unless you use your car for business, you must pay tax on your car insurance. This means that your car insurance reimbursement is also taxable.

How can I get my car insurance refunded?

If you believe you are eligible for a refund, there are a few steps you must take.

Obtain a new policy – If you require coverage, ensure that you have your new policy in place before you cancel the old one.
Cancel your insurance policy – Contact your provider and request that the policy be terminated.
Submit a written request – Writing down your request is the best way to get your car insurance refund. Send a letter to your provider explaining why you are eligible for a car insurance refund.

How much money will I receive?

When you cancel your policy or sell your vehicle, your car insurance refund will usually be pro-rated based on how much time is left on your premium. When calculating your car insurance refund, keep in mind that some insurers charge a cancellation fee, which may be deducted from your refund.

How long does a car insurance refund take?

Be patient; it usually takes two to four weeks to receive a reimbursement check from your insurer.

Many drivers are confused about how refunds work with their car insurance policy. The fine print usually contains the details, but don't feel obligated to quote verbatim to get what you deserve. All you have to do is follow the guidelines we've provided above.