How to Switch Car Insurance While Owing Money

If you are presented with a new car insurance opportunity that not only improves your current coverages but does so for less money, then it’s time to switch insurance policies. It’s possible to switch insurance while still owing money on the old policy. You don’t have to wait until policy expiration to enjoy the benefits of the more competitive and cheaper policy. There are a few steps to follow in order to switch car insurance while owing money.

Effect a new car insurance policy. Before you can switch car insurance, you must have an alternative policy in effect. The last thing you want to have happen is to cancel the old policy, even if you owe money, and find out that there is no other coverage in effect. Effecting new coverage before canceling the old policy will prevent a lapse in coverage.

Contact the old insurance agent and cancel the policy. Even if you still owe money on the old policy, you need to call your agent and cancel the coverage. Make sure that the cancellation date coincides with the effective date of the new policy. If you cancel the policy via a phone call, make sure to follow it up in writing.

Give the new policy information to the old car insurance company. This is necessary because insurance companies must notify the Department of Motor vehicles when an insured driver cancels a policy without replacement insurance coverage. By giving the policy information such as the name of the new insurance company and the policy number, the old company won’t report you as an uninsured driver.

Follow up for any return premiums due. Even though you owe money on the old policy, if the policy was not canceled for non-payment of premium, there may still be a return premium due. Insurance companies usually issue the return premium check within 30 days, but you should make a note to follow up for the return premium along with the cancellation endorsement.

Replace your insurance ID card. To avoid the risk of using the old insurance information in the event of an accident, it’s important to switch the ID card in your car’s glove compartment when you switch insurance companies.


  • Although it’s easy to switch car insurance while owing money on the old policy, don’t allow the old policy to lapse due to non payment of premium. Doing so will make it more difficult and more expensive to find replacement insurance.