Car insurance is a necessary expense for drivers. But it can take a big bite out of your budget. Since car insurance can easily cost you hundreds or even thousands of dollars each year, it’s one big-ticket item with potential room for savings.
There are many different factors that impact your auto insurance rates. A few include things beyond your control, such as your age or where you live. But one factor that impacts your auto insurance rates is the insurance company you work with.
Although you need insurance, switching providers often leads to savings. Read on to learn how to confidently switch car insurance providers.
How to Switch Car Insurance Companies
Not all car insurance companies are created equal, and making the switch is easier to do than you might imagine. Follow these simple steps to move to a new insurance provider.
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1. Calculate How Much Coverage You Need
If you’re switching insurance companies to find a better rate, you first need to determine how much coverage you actually need. This helps you right-size your policy and ensure you don’t pay for unnecessary coverage.
As a driver, your state likely requires you to carry some level of liability coverage. Although the coverage limits vary based on the state, paying for liability coverage is all but unavoidable.
Beyond liability coverage, you have some flexibility on what you carry. You can choose to pay for collision coverage, which covers damage resulting from a collision with another vehicle, animal, or stationary object. Another popular coverage option is comprehensive insurance, which pays for damage due to covered events like storms or vandalism.
The cost of these extra coverages can add up quickly, but you might not have a say in the matter. If your vehicle is leased or financed, your lender or dealer is likely to require you to carry both comprehensive and collision insurance. If you drive an older vehicle that’s paid off, you probably don’t need these extra coverage options.
As a general rule of thumb, collision and comprehensive coverage isn’t worth it if the vehicle is worth less than 10 times the car insurance premium. Run the numbers with Kelly Blue Book to see if your vehicle warrants extra coverage. If not, savings are likely within reach.
2. Check Your Current Policy for Cancellation Fees
Before you dive into comparison shopping for car insurance, look at your current insurance policy. Many insurance companies let you cancel your policy without a fee, but some won’t let you go so easily.
The details of your auto insurance policy determine whether you’ll face a cancellation fee. If there is a fee, it’s usually around $50 or up to 10% of the remaining policy premium. Be sure to weigh the potential savings against the cost of paying the fee. But in some cases, it might still be worth making a change.
Another reason to hold off on switching is if you’re in the middle of resolving a claim. Although you can do this, it could lead to higher car insurance rates down the road.
3. Research Car Insurance Companies
The right car insurance company for your situation will vary.
Infrequent drivers can save big with pay-per-mile insurance options. Students might find the best rates through an insurance company offering big student discounts.
The only way to know which is the best choice is to research the best companies out there. Start with our list of the best car insurance companies, then check out external resources like the J.D. Power Auto Insurance Customer Satisfaction series.
Your first order of business when researching car insurance companies is to eliminate options that don’t work for you. Next, you’ll compare costs.
4. Compare Quotes
Once you know what kind of car insurance you need and the providers most likely to offer it, you’re ready to shop around for the best deal on a new policy. You can compare car insurance quotes across different companies to weed out any overpriced options.
If possible, get quotes from at least three auto insurers. For those that want to streamline the process, consider a quote comparison tool. Websites like Policygenius search dozens of insurance providers to help you find the best rate and terms.
But remember to look back on your car insurance company research. A lower rate at the cheapest car insurance company doesn’t necessarily mean a good experience.
5. Contact Your Current Insurance Company
If you have no desire to stick with your current insurance company, you can skip this step. But if you would prefer to stay with them, reach out and see what you can do for you. If cost is the only obstacle to keeping your business, they might be willing to negotiate a better rate on your current policy.
This negotiation won’t be comfortable, but it’ll be easier if you already have a policy lined up with a better rate. If you ask nicely, they might simply match your new rate and be done with it.
That said, if your current insurer doesn’t offer a discount to stay, you must be prepared to walk away. You’ve already lined up auto insurance savings — why lose them now?
6. Buy the New Policy
If you don’t have any luck negotiating a better rate with your current insurer, it’s time to buy the new policy. Be prepared to lock in the policy with your first payment to your new car insurance company.
When you purchase the new policy, make sure there is no lapse in coverage. Even a one-day lapse could go on your record as an official uninsured period, resulting in higher premiums next time your policy is up for renewal.
7. Cancel Your Old Policy
With the new insurance policy in place, it’s time to cancel your old insurance coverage. Although it might be tempting to simply stop making payments on the old policy, an official cancellation is necessary.
The method of cancellation varies based on your previous insurance company. In some cases, you can complete the cancellation process online. In other cases, you must call the insurance agent to finalize the cancellation with your current provider.
If you paid for the policy upfront, cancellation leads to a refund of the unused portion. Even if you paid on a monthly basis, you might get a refund for the portion of the month you’ll no longer be using.
Some insurance companies send you refunds via direct deposit into your bank account. But more old-fashioned providers choose to mail checks for the refund amount. If required, be prepared to deposit or cash the check.
8. Print Your New ID Card
After starting a new policy and canceling the old one, it’s time to access your new proof of insurance. You can either print out your insurance ID card or download the insurance company’s app to have regular access to it.
If you opt for the digital ID card, make sure to save it on your phone. Otherwise, you could be stuck without an insurance card if you’re pulled over in an area without cellular service.
Switching Car Insurance FAQs
Switching car insurance companies can open the door to exciting savings, but it’s not the most straightforward process in the world. These are the most common questions you can expect to encounter during the switch.
Can I Switch Auto Insurance Companies Mid-Policy?
Yes, you can switch your car insurance mid-policy. In most cases, you can make the switch without any fees. But some insurance companies do charge cancellation fees. Read the fine print of your insurance policy to determine where you stand.
Can I Get a Refund if I Switch Insurance Providers Mid-Policy?
The answer depends on your insurance company. In some cases, you can get a refund on the unused portion of your insurance policy. For example, if you paid for a full year but cancel halfway through, the insurance company might refund you half of the policy premium.
If you aren’t sure about a refund, contact your insurance company’s customer service team. They will be able to definitively answer whether or not you’ll receive a refund upon cancellation.
Can I Switch Auto Insurance Companies if I Have an Open Claim?
Yes, you can switch auto insurance companies if you have an open claim. The original insurer still has to pay out the claim as if you were a current customer.
However, making the switch with an open claim means you’ll be stuck working with two car insurance companies until the claim is finalized. It could be more convenient to wait until an insurance claim is finalized before switching insurers.
Switching car insurance providers often saves you money, but it’s not a walk in the park.
As you navigate the process, be prepared to negotiate and dig for car insurance discounts. A bit of time and energy can lead to significant car insurance savings.
The process starts with understanding exactly how much car insurance you actually need, and which types of car insurance coverage. After that, you’ll want to use a quote comparison tool to efficiently shop for the best rate.
Finally, when you’re ready to finalize the switch, make sure to avoid a lapse in coverage. Otherwise, you could be in for an unwelcome financial surprise when your policy comes up for renewal.