Yes, you can stop making car insurance payments, but simply letting your policy lapse by non-payment is a serious financial and legal mistake. The correct way to end your coverage is to formally cancel your policy. If you just stop paying, your insurer will eventually cancel your policy for you, which results in a coverage lapse. A lapse in coverage is a major red flag for future insurers and will lead to significantly higher premiums when you need a new policy. In most states, it's also illegal to drive without insurance, risking fines, license suspension, and even vehicle impoundment.
There are two primary methods for properly canceling your policy. The first is cancellation, which is typically initiated by you or the insurer mid-term. The second is non-renewal, which happens at the end of your policy term. If you cancel, you may be entitled to a refund for any pre-paid premium, minus fees, depending on your state's regulations and your insurer's policies.
If you are selling your car, you can cancel the policy upon providing proof of sale. If you're storing the car and not driving it, you might be able to switch to a much cheaper comprehensive-only storage policy, which maintains theft and fire coverage but removes liability. Before taking any action, the most critical step is to secure a new policy if you still need to drive. Never allow a gap in coverage.
| Consequences of Improper Cancellation (Non-Payment) | Likelihood | Potential Financial Impact |
|---|
| Significant Premium Increase at next renewal (often 20-50% or more) | Very High | Hundreds to thousands of dollars over several years |
| State Fines for driving without insurance | High | $100 - $1,000+ depending on the state |
| License and Registration Suspension | High | Reinstatement fees ($50 - $400) |
| Vehicle Impoundment | Medium | Towing and storage fees (hundreds of dollars) |
| Difficulty Securing New Insurance | High | May be forced into high-risk, expensive plans |
