In order to register or operate a vehicle, the car must be insured with at least the state minimum liability coverage. Sometimes, however, it becomes necessary to cancel a policy. This may happen if the insured is obtaining coverage from another company, if you’re selling the car or if the vehicle is no longer operable.

If you fail to make an auto insurance payment on your policy, the insurance company will automatically cancel the policy. It’s not advisable to stop making payments without warning, however, as such an action could lead to complications with the DMV. You will also more than likely be sent to a collections agency for the back payments due to the insurer and subject to higher future car insurance rates.

Instead of avoiding your auto insurance payment, you can contact the company to discuss your options. If you want to cancel because the policy is too expensive, you may be able to negotiate a rate decrease with the insurance company. Most companies are unwilling to let customers go without making some attempt to satisfy them; take advantage of this fact by requesting discounts or rebates. You’ll often get them.

Never assume you need to cancel a policy just because you’re moving to a new city or state.

Many auto insurance companies operate nationwide, and you can transfer your policy to another area by contacting the company and making that request. You may need to find a new agent in your new town, but the insurance company should be able to help you find a new agency wherever you’re moving to.

If you have already found a new insurance company or no longer own the vehicle you’ve been insuring, you will need to cancel the policy. Whenever you need to cancel your auto insurance, there are a few steps to take to ensure that you don’t have any legal troubles or incur additional fees.

— Call the Insurance Company

If you have a local agent, contact them; otherwise, you can call the customer service number for the insurance company. After you request a policy cancellation, the insurance company may send you a form to fill out. Once you’ve completed this and chosen the date you’d like the policy to be canceled, the insurance company will cancel the policy accordingly.

— Verify that you actually need to cancel your policy

Some insurance companies offer a “storage only” policy at an extremely reduced rate. If your car is no longer operable due to damage or if you’ll be out of the country for an extended period while the car is in storage, you can put the vehicle on this type of policy rather than canceling the insurance. The cost is negligible and this way you don’t need to find a new insurer later.

— Ask if you’re entitled to a refund

If you cancel the policy midway through a pre-paid term, you may be due a refund. Be aware, however, that not all insurance companies will offer a pro-rated refund. If you’ve paid for your coverage one term at a time, you may be forfeiting the cost of it to cancel the policy. Be sure to ask the agent or customer service representative what money you might be owed.

— Set up your next policy

If you’re changing companies, you’ll want to have the new auto insurance in place before you cancel the old policy. This ensures that there are no lapses in coverage and that you’re always driving within the law. There is no reason why a vehicle cannot have multiple insurance policies at one time, so it’s okay if the policy terms overlap somewhat.

— See if you need to contact the DMV

Some auto insurance companies will contact the DMV on your behalf, but some states may require you to call them yourself. Make sure to ask if you need to fill out any paperwork or exchange your plates. If you’re canceling the policy due to the vehicle being undriveable, you may wish to speak with the DMV about the car’s registration as well.

By following these steps and abiding by any specific practices that your insurance company requires, you can be sure that you stay within the law while canceling your policy. Also be sure keep copies of any paperwork you file, such as a cancellation request, and the dates that you requested the policy’s cancellation; this can help you in the event that something goes wrong on behalf of the insurance company and the policy does not cancel the way you want it to.