Can I Change Car Insurance Before My Renewal Date? (Answer: Maybe)

Car insurance costs eat up a lot of room in your budget. In fact, the average premium nationwide tops more than $1,000 per year, according to the National Association of Insurance Commissioners; though expect to pay more in states with higher living costs, like California and New York.

One strategy to save money on car insurance is to shop around for other providers. You can change car insurance companies at any time, for any reason, even if you are nowhere near your renewal date. Depending on the company, there might be fees or other consequences, so be sure to know all of the details first.

Here's what you need to know about potentially changing your insurance coverage before your current policy term ends — and what you can do to make sure switching car insurance policies actually makes the most sense.

Things to be aware of before you switch car insurance

Here are some things to consider before canceling your current policy and trying to switch to a new insurance company:

Cancellation fees

In some cases, your current car insurance company will charge you a cancellation fee if you cancel your policy during your term of coverage. You may be charged a flat fee, which is usually between $30 and $50. Or you may be subject to something called a short rate cancellation, which imposes a penalty equal to a specific percent of premiums, depending how many days are left on your policy.

If you're considering changing plans as part of an effort to figure out how to save money on car insurance, you need to take these fees into account when deciding whether you should make a change.

If you'll save $50 a year by changing policies but the cancellation fee is $75, then it wouldn't make sense to switch until the end of your term of coverage. You can keep your existing policy in place, then research the best car insurance companies with the best rates, and make the switch when your policy ends.

Grace periods

If you make a monthly payment for your auto insurance and cancel during the grace period before your payment is due, your insurer has been providing coverage for you for several days that you haven't yet paid for.

That means you have received a service that you will rightfully owe the insurer for. It's not right to benefit from insurance protection and then fail to pay a premium for it. Take this potential payment into account when you’re doing the math to figure out whether switching car insurance providers mid-policy is the right move for you.

Accidentally getting less coverage

Figuring out how to switch car insurance can be more complicated than it seems because there are many different factors that affect car insurance rates. Here are some factors that significantly impact premium prices:

• The drivers on your policy
• Safety features of your vehicle
• Location where your vehicle is kept
• Number of miles you drive
• Your history of traffic violations
• Types of coverage needed

When you compare car insurance quotes, it's imperative you compare apples to apples. In other words, make sure you obtain quotes for the exact same coverage you currently have. Check that you've provided the same details about your driving habits and history, and look carefully at types of coverage and coverage limits.

In some cases, a policy will appear to have a better rate but, in fact, you’re simply purchasing less protection. For example, if your current policy provides collision coverage with a $500 deductible but another auto insurer quotes a lower premium but the deductible is $1,500, then the insurance isn't necessarily less expensive. In fact, you're taking a big risk that you may have to spend an extra $1,000 at some point.

Plus, your current insurer might decrease your premiums if you just raised your deductible, and that could end up less expensive than the other company you're considering.

Hidden fees

Look carefully at all the details in your current policy and in the new car insurance policy you’re considering, including things like how much per day the rental car insurance provides. You may not have ever used this coverage, but what if you need to and your new policy doesn’t cover as much?

Having to pay for a rental car for even a few days could cancel out any potential savings. When my husband purchased a Tesla in 2021, the cheapest insurance was through Tesla. We saved a lot of money initially, but when he totaled the car, we discovered Tesla’s insurance did not cover as many rental car days as our plan with Geico would have. They also took a month to cut us a check, meaning we paid for the rental car out-of-pocket for two weeks, negating any savings we initially had.

You don't want to switch to a plan that looks like it has a lower rate on the surface but that could actually put you at risk of huge out-of-pocket spending if something goes wrong.

Coverage gaps

When you switch auto insurance policies, it's imperative your new policy term begins exactly when your old one ends, or that there is a slight overlap in the two plans. You don't want to have a coverage gap of even one day.

This is true both because it could be a disaster if a car accident occurred on that day and because insurers will want to know that you've had continuous coverage. Even a short lapse in insurance coverage could make your future premiums higher because you'll be seen as a riskier person to insure due to the fact you took the chance of going with no policy.

So, should you cancel car insurance before the renewal date?

Although you can cancel insurance coverage before your existing policy term ends, you need to consider all the above factors to decide whether doing so really makes sense. If you've evaluated all the possible issues and still think you should switch car insurers, then go ahead and sign up with a new insurer and end your old policy.

But if you're wary of making a shift mid-policy because of cancellation fees, that doesn't mean you're necessarily stuck paying the premiums you currently owe. You have lots of options for reducing your costs even with your current insurer.

You could potentially lower your insurance premium with your current provider by doing the following:

• Raise your deductible
• Drop some types of coverage you no longer need
• Ask what discounts you might be eligible for
• Look into the possibility of bundling homeowners and car insurance

By making an effort to reduce the costs of your existing insurance policy, it'll be more attractive to stick it out with your insurer and just wait to switch companies until the renewal date of your current policy. In fact, you may decide you don't really need to make a change at all.

FAQs

Bottom line

Changing car insurance whenever you want is possible, but you need to make sure it's really the right option. You might consider talking with an insurance agent to find the right policy or get answers to any specific questions you may have about coverage. The best time to switch is when you will not incur any fees or consequences; so for you, that might mean near the policy renewal date.

You can also easily shop around on your own for the best price on auto insurance coverage, but just make sure you understand all the details of both your current policy and your potential new policy before you make the switch.