Most states require drivers to carry auto insurance. Depending on state laws, drivers can face fines and such penalties as license suspension if they allow their insurance coverage to lapse; and if a driver has an accident while uninsured, he can face even stiffer penalties. Thus, drivers must be careful to pay their insurance premiums on time every month so that they don't risk cancellation for non-payment, and should never cancel their insurance unless they already have new insurance in place.
If you are switching insurance, you should set up your new insurance so that it begins immediately after you cancel your old insurance. If you do not do this, you will have a lapse in coverage — a period of time you are not insured. Cars Direct states that you may get fined for letting your insurance lapse if you do this, and in some states your license can be suspended if you do not have insurance.
If you are switching insurance companies, you should inform your old insurance company at least one month in advance of your expiration date. This gives you a month of continuous coverage while you switch to your new insurance carrier so that you do not have to worry about lapses in insurance. It also gives you time to cancel your old insurance policy before it automatically renews.
Cancel In Writing
Cancel your old insurance in writing. If you do not cancel your insurance, the company will cancel it when you do not pay your premium; however, it will also send a notice to your state's DMV saying that you canceled your insurance. You will then have to prove to the DMV that you have new insurance with no lapse in coverage. In addition, you may get collections notices or phone calls on the unpaid premiums.
If your insurance company cancels your insurance, you must get new insurance before your policy officially ends, to avoid a lapse in coverage. The insurance company reports the cancellation to your state's DMV, regardless of who chose to terminate the policy; so you can still be fined if you have any lapse in coverage, and you cannot legally drive in most states until you have new insurance. Cars Direct reports that if your insurance company cancels your insurance for reasons other than non-payment, the company must send you a written notice and give you a short window of time to find new insurance.