Refunds · 10 min read · Reviewed November 10, 2026
Cancelling your old policy: refunds, fees and timing
Once the new policy is in place, the old one has to be closed. That last call often raises the same questions: will any money come back, will there be a charge for leaving, and how long does the refund take? The answers depend on the company, the state, and how you paid.
This guide explains the two common ways a refund is calculated, the fees some companies keep, what changes when you paid monthly instead of up front, and the timing that keeps the cancellation clean on your record.
In this guide
Pro rata and short-rate refunds
When you leave before the term ends, you have usually paid for days you will not use. Companies return that unused premium using one of two methods. A pro rata refund is a straight daily share: if a third of the term remains, you get back a third of what you paid for the term. Many states require pro rata refunds for policies the insured cancels, and many companies use it regardless.
A short-rate refund keeps back a portion as a penalty for leaving early, commonly around ten percent of the unused amount, though tables differ. Where state law permits it, the method is written in the cancellation section of the policy. Look for the words "pro rata" or "short rate" there, or ask the company which one it uses.
Fees that can apply
Separate from the refund method, some companies charge a flat cancellation fee, often between $25 and $50. A few states limit or ban such fees. Policies sold with a fully earned policy fee, a one-time charge collected at the start, may not return that fee at all. Ask for the dollar figure in writing before you cancel so the refund does not come as a surprise.
Paid in full versus paid monthly
If you paid the whole term up front, the refund can be substantial. If you pay monthly, there may be little or nothing left to return, because each payment covers roughly the month ahead. In some monthly plans the most recent payment covers a few days past your cancellation date, and those days come back as a small credit.
Be careful with monthly installment plans that collect payments slightly behind the coverage they buy. In that case leaving can leave a small balance owed, which the company will bill you for. Ask whether you will owe anything or receive anything, and the exact amount.
How long the refund takes and how it arrives
Refunds commonly arrive within two to six weeks, and some states set a deadline for returning unearned premium. The money usually goes back the way you paid: to the card you used, to the bank account behind your automatic withdrawals, or as a mailed check. If you moved recently, confirm the mailing address, because a check sent to your old home is a slow way to get your money.
Do not let it cancel for nonpayment
It is tempting to stop paying and let the old policy fade away. The company may then cancel it for nonpayment after a grace period, and that kind of cancellation can show up when a future company reviews your history. It can also leave the dates uncertain, so you do not know exactly when coverage stopped, and an unpaid earned premium may be sent to collections.
A deliberate cancellation request avoids all of that. Give the company the date you want, ask for written confirmation, and keep the confirmation until the refund arrives and for a few years after.
Worked example
Margit Solberg leaves in August
Margit Solberg paid $1,140 up front on March 1 for a twelve-month policy on her sedan. In mid-August she finds a new company charging $860 a year and sets the new policy to begin on August 15. On that date 199 of the term's 365 days have been used and 166 remain.
Under a pro rata refund, she would get back $1,140 × 166 ÷ 365, which is about $518.47. Her old company, however, uses a short-rate table that keeps ten percent of the unused amount, so the refund drops to roughly $466.62, and it also charges a $25 cancellation fee. Her actual refund is about $441.62, mailed as a check within four weeks.
Even with the short-rate penalty and fee, Margit comes out ahead: the new policy saves her $280 a year, and the cancellation confirmation shows August 15, matching the new start date exactly.
Names, cars and dollar amounts in this example are made up so the sums are easy to follow.
Checklist
- Find the cancellation section in your old policy.
- Ask whether the refund is figured pro rata or short rate.
- Get the cancellation fee, if any, as a dollar figure in writing.
- Give a cancellation date that matches the new start date.
- Confirm where the refund will be sent and how.
- Keep the written confirmation until the refund arrives.
Quick reference
| Method or charge | How it works | Where to check |
|---|---|---|
| Pro rata refund | Unused days returned in full, as a straight daily share | Cancellation section of the policy |
| Short-rate refund | Unused days returned minus a penalty, often near ten percent | Policy wording or the short-rate table |
| Flat cancellation fee | Fixed charge, commonly $25 to $50, where state law allows | Ask the company for the figure |
| Fully earned policy fee | Start-up charge that is not refunded | First bill or declarations page |
| Monthly plan balance | May return a few days or leave a small amount owed | Most recent billing statement |
Six key terms
Unearned premium
The part of what you paid that covers days after your cancellation date.
Pro rata
A refund method that hands back unused days at the same daily rate you paid for them.
Short rate
A refund method that keeps a penalty share of the unused premium when you leave early.
Grace period
The few days after a missed payment before a company cancels for nonpayment.
Cancellation for nonpayment
An ending the company starts itself after bills go unpaid, which future companies may see.
Earned premium
The part of the premium that paid for the days you were actually insured.
Questions to ask the companies
- Do you figure my refund pro rata or with a short-rate table, and can you show me the math?
- Is there a flat charge for cancelling, and is it allowed in my state?
- Was any part of my first payment a fully earned fee that will not come back?
- On a monthly plan, will I receive a credit or owe a balance after the cancellation date?
- Will the refund return to my card, my bank account, or arrive as a check, and to which address?
- How many business days after the cancellation date should I expect the money?
Bistrehaven describes common practice. Your own policy wording, company and state rules decide how your switch is handled.