If you’re happy with your current car insurance provider and your rate, you probably haven’t considered switching to a different company. But if your premium goes up, you have to file a claim or if you’re in an accident, you might start looking at cheaper options.
Many drivers stay with their auto insurance provider for years without thinking twice about switching. However, you might be paying more for your car insurance policy than you need to. If the price of your insurance is increasing and you aren’t eligible for discounts then it might be time to move to another company.
Different car insurance companies offer different rates, and sometimes the rates can vary significantly. Comparing rates between providers ensures you’re getting the best price for the amount of coverage you need. Additionally, some companies may offer better discounts than others, which can help you save money.
If you’re considering moving to a different insurance provider, it’s important to understand the process. Switching providers isn’t as simple as cancelling one policy and purchasing another. Here are the nine steps you should follow in order to change car insurance providers.
1. Consider your coverage options
Too little insurance can leave you financially exposed, but too much coverage may mean you’re paying more than you need to. If you think you’re spending too much, 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.
She also suggests considering your age to determine the amount of coverage you need. For example, a 22 year old driver who rents their apartment and has minimal assets might need less coverage than a 55 year old driver who owns a home and has a large savings account. However, keep in mind that younger drivers almost always pay more for car insurance than older drivers.
2. Decide if the time is right
Most auto policies last for six months or a year, depending on your state. One of the best times to check out other carriers and their premiums includes when you move. Your zip code, the distance you drive to work and whether you park in a garage will all impact your insurance premiums. You should also look at insurance options following other big life events like getting married because married people often get lower rates.
If you are moving because you bought a house, you often can bundle your home and auto insurance to save money. Most car insurers give discounts when you add another car or driver to your policy or any time you bundle policies.
If you have an accident or an open claim, it might not be a good time to switch. You might have to deal with two insurance companies while the details of the claim are settled. Also, because insurance companies usually recalculate your rates around your renewal time, a new insurance company might calculate your rate higher than your current rate higher than it would be if you stay with your current provider for a few more months.
It also might not be a good time to switch if you have a long time before your renewal. You may have to pay penalties that could make changing policies less worth it.
If you don’t have a major change that might make you want to change your policy during coverage, insurance experts like Demora recommend that you do your research a month or two before your policy is up for renewal.
In addition to inquiring about discounts, pay attention to the benefits offered between carriers. Just because an insurer quotes a lower premium doesn’t mean that the coverage will meet your needs. If the lower premium is due to a higher deductible and you’re in an accident, the policy could cost you more in the long run. A cheaper policy also isn’t useful if it’s full of benefits that aren’t relevant to your needs.
Make certain you understand what’s covered and how much protection you’ll receive under the new policy. While you can speak to your current insurance agent about your options, also ask friends, family members, co-workers and other people you trust for their recommendations on a car insurance company.
“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.”
3. 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, including Geico, State Farm and USAA, will likely refund your entire unused premium, some may hit you with a fee if you choose to cancel in the middle of your policy term. Esurance, for example, warns its customers that they may charge $50 if they cancel before a policy expires.
If you find out that you will be charged a penalty for canceling in the middle of your term, do the math and determine whether you’d be better off switching now or waiting until your policy expires.
4. Compare car insurance quotes from multiple carriers
Comparing rates from multiple different companies gives you a better understanding of average costs and standard coverage options. Getting car insurance quotes is an easy process, but you’ll need some basic information to get an accurate quote. A lot of factors can influence your car insurance rates, which leads to variations between providers. The following is a typical list of the necessary information, as listed by State Farm:
- Vehicle information:You’ll need the make, model, year, VIN, current mileage and ownership details of your vehicle.
- Address: Where will this vehicle be parked overnight? Will it be parked in a garage, driveway or on the street?
- Drive information: Include the name of driver(s) to be insured, age, driver’s license number(s) and state of issue
- Driving history: Have you (or any other person on your policy) ever been issued a ticket or had a suspended license?
Other factors can also impact your pricing, including discounts for which you’re eligible. The best car insurance companies combine excellent service with discounts that reward their customers for loyalty and good driving. Common discounts include:
- Having a good driving record
- Driving a low number of miles per year
- Getting good grades if you’re a student.
- Taking a driver’s education course
- Bundling your auto insurance with your home insurance
5. Contact your current carrier
If your insurance company values you as a customer, they may be willing to fight hard to keep your business. Talk to your agent and let them know that you’re in the market for a better deal. It could convince your existing insurer to match or beat rival car insurance quotes to keep you from switching car insurance.
You can also find out whether you’re missing out on any discounts with your current insurer. “Living a low-risk lifestyle can pay off — literally,” says Demora. “Maintaining a good driving record, attending refresher driving courses and young drivers who get good grades are just some of the discounts your insurer can offer to help keep your premium low.”
If the first person that helps you cannot offer you a better deal, try contacting them again later or with multiple competitor quotes. You may reach a different agent who is willing to reduce your premiums.
6. Research the new company
Check out an insurer thoroughly before signing on. Most state insurance offices monitor carriers’ customer complaint ratios, which is the number of complaints for every $1 million in premiums collected. A high ratio warns you that the company’s current customers aren’t very happy.
Before committing to a new insurance provider, it’s important to research the company using reputable sources. You can read online reviews and look at their ratings from the Better Business Bureau (BBB). You can also use J.D. Power’s insurance studies and Bankrate’s own carrier reviews. Another research tactic is to call the carrier to get a feel for what their customer service is like, which can give you the most accurate glimpse into their helpfulness and reliability.
Think twice before signing up with an insurer just because they offer the lowest car insurance quotes. Although some companies offer great rates, they may be difficult to deal with during the claims process.
7. 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 become involved in an accident while uninsured. Specifically, your old insurer could report your terminated policy to the state. If there isn’t a clear overlap or smooth transition from one policy to another, you could be penalized or find your driver’s license suspended.
It also could cause insurance companies to charge you higher premiums down the road because they may 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.
8. Make sure your old policy is canceled
If you’re switching car insurance to a new insurer, there are a few things you need to do to confirm that your current policy is truly terminated. Don’t 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. Instead, take the following steps to terminate your old policy and preserve your credit worthiness.
- Contact your current insurance agent 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.
- Let your agent know that you want the termination confirmed in writing. It gives you proof that you canceled the policy if you continue to get billed or see a negative remark on your credit report. You can dispute the charges or credit report entry.
9. Print out your new car insurance ID cards
Once you’ve officially canceled your old policy and switched to a 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’ll 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 for switching your car insurance
How often should I shop for a new car insurance policy?
Evaluate your rates and options at least once a year. As your financial situation and driving history change, the rates that insurance companies offer you can change too. It’s easy to shop and compare car insurance quotes online, and you’ll know that you aren’t leaving any savings on the table.
Do car insurance companies offer discounts?
Car insurance companies offer a range of discounts for different driver profiles. To explore cheap car insurance options, look for car insurance discounts for students, teachers, young drivers, safe drivers and military personnel if those categories apply to you.
Can I switch car insurance while I have an open claim?
Switching car insurance companies is possible while you have an open insurance claim. Your current insurer will resolve the existing claim along with any necessary payouts with no penalty.
Do car insurance companies refund premiums I already paid?
It depends on your car insurance company’s refund policy. Call them to understand their insurance cancellation policy. In many cases, you are eligible for a refund when you cancel your car insurance.
It makes financial sense to get into the habit of reviewing your car insurance policy on a regular basis. After all, the driving situation in your household is likely to change from time to time and may affect the price of your premiums. Taking the time to perform some research by reviewing car insurance quotes may help you land the best possible price and reduce the overall cost of car ownership.
Is it bad to switch car insurance companies frequently?
There are generally no consequences in switching car insurance companies frequently. Most insurance providers allow customers to cancel their policy at any time, even if you have a claim open. However, it’s usually best to switch at the end of the policy period.
Keep in mind that some insurance providers charge a cancellation fee if you decide to cancel your policy before the term ends. If you’re switching to a cheaper provider, it might justify the cost. But if you’re changing providers every year, you could be getting charged a fee each time you do it.