Can I Cancel Insurance After Completing Auto Loan Payments?
2 Answers
It is possible to cancel insurance after completing auto loan payments, but the cancellation must be approved by the lending bank or guarantor company. This means the insurance company will require a stamped cancellation approval from the lending bank. Documents required for auto insurance cancellation: Cancellation application, which should state the reason and time for cancellation. If the insured is a company, it must be stamped; if an individual, it must be signed; Original insurance policy (if lost, it must be reissued beforehand); Premium invoice, generally the original is required, but a copy may also suffice. Documents proving the reason for cancellation: For cancellation due to vehicle scrapping, a scrapping certificate must be provided; For cancellation due to vehicle resale, a transfer certificate must be provided; For cancellation due to duplicate insurance, both overlapping insurance policies must be provided.
I also looked into this when I got an auto loan before. Canceling insurance is indeed possible, but there's a major prerequisite—you must first pay off the loan. The bank uses the car as collateral, and they're listed as the beneficiary on the insurance policy. If you try to cancel insurance before repaying the loan, the bank won't allow it, as that would remove their protection. The cancellation process requires first obtaining a loan clearance certificate from the bank, then removing the collateral registration at the DMV, before finally approaching the insurance company. And don't expect a full refund—insurers deduct two portions: 1) premiums for elapsed coverage days, and 2) roughly 10% cancellation fee. Last year my friend refunded his commercial insurance after early repayment—his ¥3,000+ premium only got about ¥1,000 back, proving less cost-effective than simply letting it expire naturally.
