The Biggest Myth In Insurance (Or How To Cancel Your Insurance Anytime)

When I tell folks what I do, build software to optimize insurance and improve financial health, they reply with all manner of insurance stories.

Some crow about perceived low rates or a deal through, and some share tragic stories of mis-purchased insurance that did not cover them for catastrophic events when they came down the pipe. Sometimes, people believe in myths and misconceptions about the insurance purchasing process.

The most common, and perhaps most harmful, of these myths is that there is a set renewal time for insurance (there isn't) and that changes can only occur when an existing insurance contract has lapsed or is up for renewal. 

What these customers don’t know is that thanks to regulation on the insurance industry by state governments, you can get refunded on a prorated basis if you pay your bills and want out for a cheaper rate elsewhere.

There are a few exceptions to this; in some states Progressive buyers will have to pay $50 to cancel a policy early if it's their first policy with the company, but even within that set, there is still financial benefit to buyers who switch policies.

Some people figure this out when they change policies, after their rates have jumped, but most prospective users I chat with are shocked to learn that they can switch out their home/renter’s/auto/general liability insurance and get a prorated refund at any time.  

When asked why this belief exists, some justifications recur more than others.

The main one is that folks believe their home, renter’s, auto, or general liability insurance follows a similar registration cadence to their health insurance. Since health insurance comes with many strings attached– employment dependence, set enrollment periods, and other unfortunate trap doors– they, reasonably, assume that many of these constraints extend to other forms of risk pooling and sharing.

Given that it is in the industry’s interests to allow this myth to persist, why would you ever want to let people know that its costless to switch, and that insurance is the unloved stepchild of an already deficient system of financial education and literacy, this myth will persist until everyone has heard the good news about the service that helps you switch to an optimal set of insurance policies ;). 

Reviewed by Max Cho , Licensed Insurance Broker NPN 20377411

At Coverage Cat we will do everything we can to correctly cancel your insurance for you when we help you find a new policy. However, working in the interest of their profit margins and not their users, most companies won’t allow it to be an automated or even online-only process.

The final opportunity to apply sales pressure and spook customers into not switching their policies. To help mitigate this hostility, we’ve included a short table below with instructions on how to cancel policies from many of the major carriers, with links to their documentation and cancellation numbers where they exist. 

Ultimately, it is up to government regulators, consumer advocacy groups, and industry believers to push back against this dreadful current state of affairs.

Insurance is a product with tremendous potential to protect and compensate people when they are at their most vulnerable. It should not be structured as a hostile, information sensitive, and adversarial relationship between customers and their providers. Know your rights as a responsible insurance buyer!