Switching car insurance might be a smart choice, especially if you have recently moved or bought a new vehicle. Many people do not realize that auto insurance premiums can change based on major life events, and you can sometimes save money by simply changing providers. Every insurance company uses different factors to calculate car insurance premiums. If you move to a new ZIP code, for example, a new provider could be hundreds of dollars cheaper.
Of course, you may not be looking to save money. You might just be looking for different or better coverage. Whether you recently got married or are about to have a teenager behind the wheel, you will still want to shop around and review different providers to make sure you have the best car insurance for your needs.
- If there has been a major change in your life, such as getting married or buying a new car, you may want to consider switching car insurance companies.
- When you switch insurance companies, always verify that your old policy is officially canceled.
- Avoid lapses in coverage that could put you at financial risk.
- If you just filed a car insurance claim, you will likely not be able to switch carriers—and most insurance experts say it’s not a good idea to try until your claim has been settled.
When to switch auto insurance companies
Although you can change car insurance companies at any time, there are often situations that lend themselves well to looking for a new company. These circumstances may include:
- Moving to a new ZIP code, city or state: Your city, state and even your ZIP code, may all impact your car insurance premium. If you are moving, it may be a good time to consider a new car insurance company to at least see if rates are more competitive in that area.
- Adding a driver or car: If your teenager is about to get a license or you are adding a new car to your household, consider getting quotes from other insurance carriers. Every company has different rates, and many offer student-based discounts, so you may find a company that offers a lower premium for your new driver or vehicle.
- Experiencing a life event: Life events like getting married, buying a home or having a child can impact your insurance needs and premium. Updating your current policy or searching for a new one may be a good idea under these circumstances.
- Approaching your renewal date: You can change your car insurance at any time, but your renewal date offers a particularly convenient time to switch. If you cancel your old policy on its renewal date and start your new policy on the same date, you may be less likely to have to deal with small bills or refunds on the old policy. The important thing is to ensure there are no lapses in coverage because this can leave you financially vulnerable and may increase the cost of future premiums.
While switching carriers can have its advantages, there are also times when changing insurance companies may not be a good idea. If you have just filed a claim, for example, you likely will not be able to change carriers. If the claim has not been settled and paid, your new car insurance company will not have the opportunity to correctly rate your policy. This could cause a large increase in your new policy at renewal, a retroactive charge to account for the increased risk that the new company did not know about or even a cancellation for misrepresentation if you did not tell your new carrier about the claim.
1. Consider your coverage options
Too little insurance can leave you financially exposed, but too much coverage may mean you are paying too much. If you think you are overspending, consider switching car insurance.
“Ask yourself: do I drive an older vehicle? If you do, you may not need collision and comprehensive insurance, or you may decide to choose a higher deductible to save money,” says insurance expert Michelle Demora.
Ultimately, the more coverage you add to your car insurance policy, the more it will cost. If you are wondering how to switch auto insurance, understanding the different types of car insurance coverage — and which ones you need — is an important first step.
2. Check for potential penalties
If you decide that switching car insurance is the right option, find out if there are any penalties for changing before the end of the coverage period. Fortunately, auto insurance companies generally give you the right to cancel your policy at any time as long as you give proper notice.
While most insurance companies will likely refund your unused premium, some may charge a fee if you choose to cancel in the middle of your policy term. Before cancelling your policy, you may want to talk to your company’s customer service department or ask your agent if the company has any specific cancellation stipulations.
If you find out that you will be charged a penalty for canceling in the middle of your term, you may want to reconsider switching policies. If you can find a new policy with a premium that makes up for any cancellation fees charged by your old carrier, it may still make sense to change companies.
3. Compare car insurance quotes from multiple carriers
If you have decided that it is a good time to change carriers, the first thing you might want to consider doing is get quotes from several different auto insurers. This will allow you to compare auto policy premiums, coverage options and discounts. Just make sure you are getting quotes for the same coverages so you are comparing apples-to-apples premiums.
“Family members and friends are valuable resources when it comes to shopping around for new products and services,” says Demora. “A lot of times, they’ve already done the legwork to provide helpful advice and narrow down your search — and finding the right auto insurance provider is no exception.”
Whether you are getting quotes online, by phone or at an agency, you should be prepared with some basic information. To get an accurate quote, you will need to provide the following:
- Address where the car will be stored
- Car year, make and model
- Driver’s license or social security number (car insurance providers will use this information to look up your driving history and any other personal factors that might affect your premium)
As you are researching companies, you can also review available discounts. Asking companies to include all the discounts you qualify for on a quote could help you to find cheaper coverage.
4. Contact your current carrier
As you are getting quotes from other carriers, it could be beneficial to contact your current car insurance company. Although your company will not be able to provide you with a lower rate just to keep your business, you may be able to identify discounts and other savings opportunities that you are currently missing. Your agent may have suggestions about how to lower your costs, like maintaining a clean driving record or even buying a less expensive vehicle.
This step is particularly important if your insurance is with an independent agency. Independent agents are able to represent numerous insurance companies, unlike captive agents who only sell insurance products from a single company. An independent agent may be able to shop your policy with their carriers to find you a lower rate while still keeping your policy in the same agency.
5. Research the new company
You may want to research an insurer thoroughly before purchasing a policy. Some helpful resources include:
- The National Association of Insurance Commissioners (NAIC): This organization assigns a score to each company based on the average number of complaints it receives. A score above 1.00 indicates an above-industry-average number of complaints, while a score below 1.00 indicates a below-industry-average number of complaints.
- J.D. Power: This company conducts studies from multiple angles, including overall customer satisfaction and claims satisfaction, and assigns a score out of 1,000.
- AM Best: If you are wanting to know more about a company’s financial strength, AM Best may be a good resource to use. AM Best assigns companies a letter grade financial strength score, which can indicate how able a company is likely to be to pay out claims.
- Bankrate insurance company reviews: Our editorial team analyzes average premiums, customer service scores, financial strength ratings, available coverages and discount offerings to determine the best auto insurance companies. We have national reviews as well as reviews specific to each state.
Although price is an important consideration, it is not the only thing you should consider when choosing a car insurance company. Working with a licensed insurance professional may help you to choose a company that fits your needs.
6. Avoid a lapse in coverage
“When changing insurance, it’s best to plan on doing so just before your current policy expires,” says Demora. “Switching early prevents you from having a gap in your coverage.”
A lapse in insurance coverage could lead to serious legal and financial challenges, especially if you are involved in an accident while uninsured. If you cause an accident and you do not have insurance coverage, you will be responsible for the damages, including any applicable medical bills, out of pocket. Even if you are not at fault, most states require insurance companies to file proof of insurance with the DMV after an accident if police are called. If you do not have insurance, your license could be suspended.
Driving without insurance could cause insurance companies to charge you higher premiums in the future because they may consequently perceive you as a high-risk driver. Your new insurer should be able to time the new policy so that it begins exactly as your old coverage ends.
7. Make sure your old policy is canceled
If you are switching car insurance to a new insurer, do not assume that if you stop paying premiums, your policy is automatically canceled. If you signed up for auto-renewal, your current provider could report you to credit bureaus for non-payment. Most insurance experts recommend that you contact your current auto insurance provider to cancel your policy when you are switching to a new car insurance company.
You can take the following steps to terminate your prior policy:
- Contact your current insurance company and notify them that you are terminating your policy. This will prevent them from billing you for future coverage.
- If you signed up for auto-payment, you may need to log into an online account and cancel the auto-withdrawals. If you use your bank’s bill pay service to pay your premiums, be sure to stop the payments with your bank.
- Ask your carrier to confirm the termination in writing.
Each insurance company has its own process for cancelling policies. You may need to sign a form authorizing a cancellation, or you may need to call and speak directly with an agent. Some companies might let you do it online, but you may feel more comfortable putting it in writing or speaking with someone to confirm that cancelation.
8. Print out your new car insurance ID cards
Once you have officially canceled your old policy and started your new one, switch out your old insurance ID card for an updated one in your vehicle or wallet. If you get stopped by the police or become involved in an accident, you will need proof of coverage under your new provider.
“Most insurers allow you to access your ID card online through your smartphone, but it’s best to have a hard copy in case you’re stopped in an area without cell service,” explains Demora.
Frequently asked questions
How often should I shop for a new car insurance policy?
Many people often ask, “When should I switch car insurance companies?” The answer is different for everyone, but if your financial or life situation has changed since you purchased your car insurance policy, it may be time to shop for a new one.
You can also contact your current provider to keep your current policy updated with your needs; your carrier may be able to adjust your policy accordingly. However, just because you shop for a new policy does not mean you have to switch your coverage. Staying with one company for a length of time you could earn loyalty discounts.
Can I switch car insurance while I have an open claim?
Switching car insurance companies may be possible while you have an open insurance claim, but most insurance providers advise against it. Your current insurer will resolve the existing claim along with any necessary payouts.
However, if the claim is still open when you move to a new policy, your new carrier will not have the payout information to correctly determine your risk level. This can result in an increase at your renewal or a retroactive amount due to make up for the time period when your claim was not able to be rated correctly on your policy. Every company has its own underwriting guidelines and may not accept new business with open claims.
Do car insurance companies refund premiums I already paid?
Your insurance company will be required to refund any unearned premium; however, it may charge a cancellation fee to cover administrative costs of canceling the policy, especially if you are canceling in the middle of your policy term. Call your company to understand its insurance cancellation policy. If you cancel your insurance policy on its renewal date and you have not yet paid the renewal premium, you likely will not be eligible for a refund.