Getting car insurance is essential for car owners, and depending on where you live and whether you financed your vehicle purchase, it may be required.
But sticking with the same car insurance company for a long time may not always be the best idea. As some of the factors that impact your car insurance rate change over time — such as where you live, how much you drive, and your driving record — you may be able to get a lower rate by switching your car insurance to a different provider.
If you’re wondering how to switch car insurance — or at least shopping around to see whether you’re still getting the best car insurance rate — here are seven steps to help you.
Decide whether it’s a good time to switch car insurance
It’s always a good idea to shop around once every year or two to make sure you’re getting the best rate available to you. But there are some life events that may make it worth your time to look at car insurance quotes from new insurance companies:
- You recently moved. One of the factors that goes into determining car insurance rates is where you live. If you’re in a city, you’re more likely to get into an accident and file an insurance claim than if you live in a rural area. If you’ve moved to a different zip code, it could impact your rate with your current policy, and it’s possible another insurer carrier can offer you a better rate for that area.
- You got married. Insurance rates can vary for single drivers versus married drivers, and some insurers may weigh that factor differently than others, which could lead to lower rates.
- Your policy is about to renew. In general, auto insurance policies last six or 12 months and renew automatically. Before your policy renews, the company will update you with your premium for the next policy period. If you notice a significant increase, it could be an opportunity to check with other insurers to see whether you can find something better.
- You bought a new car. The type of vehicle you drive is another important factor in determining your insurance rate, so if you purchase a new vehicle, you may be able to find a company that offers better rates for that particular make and model.
- Your credit score has improved. Most auto insurers use a credit-based insurance score to help determine your premium. But if you’ve improved your credit score since you got your current policy, your current company may not run another credit check to determine your rate going forward. As such, it can be financially worthwhile to check to see whether your good credit habits could score you a lower premium elsewhere.
Ultimately, when you decide to consider switching is up to you. But consider these situations as an opportunity to use changes in your situation to your advantage.
Evaluate your current coverage
Check your current insurance policy to see where your coverage stands. Look at each of the various types of car insurance that your policy includes. Do you have too much coverage based on what you need? Or is it possible you don’t have enough?
There’s no correct answer for how much coverage you need, so just ask yourself how much would give you peace of mind. If you don’t have enough liability coverage, for instance, and get in an accident, it could wreak havoc on your finances. In contrast, if you have far too much coverage, you could be paying for something you don’t need.
Depending on your answers to these questions, you can just change your coverage with your current insurer. And if you’re satisfied with the change in your premium based on those updates, you may not need to go any further.
But again, different companies will price coverage amounts differently, and if you need more coverage or you want to cut some of your policy’s benefits or perks, it may be possible to find a better deal with a new car insurance company.
Check your current insurance for penalties
In most cases, auto insurance companies allow you to cancel your policy without incurring an early termination penalty or cancellation fee. You’ll also typically get a refund of the unused portion of your insurance premium. But make sure to read the fine print of your policy before you proceed.
If you find that your insurance company does charge a cancellation fee, though, don’t stop there. As you shop around and compare rates from other insurers, you can run the numbers and see if the savings outweigh the cost of switching policies. Switching to a new provider may save you so much that it offsets the penalty from your old insurance company. If it doesn’t, you may need to wait until your old policy is up for renewal to make the switch.
Also, note that if you move to a different state, you may have to cancel your current policy and get a new one with the same company anyway. If that happens, you may be able to switch off your old policy without incurring a penalty.
Shopping around is the best way you can save money on car insurance. Not only does each insurer weight factors differently, but each typically also offers various car insurance discounts that can help reduce your premium. These could be things like good driver or good student discounts, or even a discount if you’re bundling multiple types of insurance with one company.
During this part of the process, it’s important to compare rates from at least three or four car insurers to get an idea of what you can qualify for. Some insurance websites offer a comparison tool that will do some of that work for you. You just have to enter all your information once, and you’ll get quotes from multiple car insurance providers in one place so you can look at them side by side.
The info you’ll need to have on hand to do this includes things like:
- Your name and address
- Your age, date of birth, drivers license and other personal information
- Information about your vehicle
- Your driving history (particularly any accidents and moving violations)
As you’re looking at your different insurance options, it’s important to note that the first number you’ll typically get back from a company is just an estimate. In other words, you have to actually apply with that provider to get a final quote, which may or may not be the same as the initial one.
Also, make sure the auto insurance quotes you get back from any company include all the discounts you qualify for. And if you do see a better quote from a competing insurer, call your current insurance provider and see whether they’re willing to make an offer to keep your business.
Sign up for your new insurance
While you’re switching your car insurance to a new company, it’s absolutely critical to avoid a lapse in insurance coverage. Even if you go just one day without a policy, insurance carriers may see that as a red flag and make it challenging for you to get affordable coverage in the future.
As you’re setting up your new car insurance account, consider using a cashback credit card that offers rewards to make your premium payments. That way, you can take advantage of earning money back on an expense you’re going to have regardless of how you pay it.
Also, note that you’ll typically get a discount if you pay your insurance premium in full for the policy term, versus paying it out over the six to 12 month period. If you can’t afford to do this, it’s critical that you set up automatic payments, so you never miss a payment and risk a lapse in coverage. Even if you’re paying in full, autopay is generally a good idea.
Cancel your old insurance
After you’re certain that your new policy is in force, take steps to cancel your old one. Stopping your payments may not be enough, and it could cause some problems with your credit if you’re reported for non-payment.
Start by calling your old insurer and letting them know you want to cancel your policy. You should be able to get a confirmation number when this process has been completed. Write that down so you can use it if the cancelation somehow doesn’t go through.
It may also be a good idea to send your insurance agent a written confirmation that you want to cancel your policy. Having a paper trail can come in handy if you end up having to dispute a negative item on your credit report.
After you’ve canceled your old policy, log in to your online account and remove your payment information, so there’s no way for another charge to accidentally occur.
Print out your new policy insurance card
If you get into an accident or are stopped by law enforcement, you must provide proof of insurance. So once your new policy is set up, log in to your online account and print off your insurance ID cards — some insurers may offer to send them in the mail — and place a copy in your glove compartment.
Note that some insurers, including Geico, allow you to view your insurance card from its mobile app. But in my experience getting in two separate accidents last year, police officers prefer a hard copy they can take into their cars to confirm the information is correct.
That said, it’s still a good idea to install the insurer’s mobile app for general account management. And if you forget to print off your new card when your policy renews down the road, having the information on your phone is better than nothing.
FAQs about switching car insurance
As we researched switching car insurance companies, we saw several questions that came up a lot. Here are some of the common questions about switching car insurance, along with the answers that can help you make the right decision for you.
Is it bad to switch car insurance companies?
As long as you’re not paying more with the new insurance company, there’s no negative impact involved with switching car insurance. Insurers run just a soft credit check, so your credit score won’t go down just from getting a car insurance quote, and you won’t be penalized in any other way unless you have to pay an early cancellation fee to your current insurance company.
Can you change your car insurance coverage at any time?
Yes, you don’t have to wait until your policy is up for renewal to be able to switch your coverage to a new insurer. That said, check with your current company to see whether there’s a fee associated with canceling your policy before the current period ends.
Do car insurance companies offer discounts?
Every major car insurance company offers several discounts to prospective policyholders. These discounts are used to incentivize people to switch. They’re mostly focused on safety features, driving habits, and other factors that can help you save money on your policy.
As you’re shopping around, check each insurer’s website to see which discounts they offer. If you’re a student, you might look for a discount for good students. If you’re willing to take a defensive driving course, many companies will give you a discount. It may also be worth calling and speaking with an agent to get the full list of discounts so you can see which ones you qualify for.
Do I get a refund if I cancel my car insurance?
Yes, if you cancel your car insurance policy before its current policy term is up, you’ll typically get a discount for the remaining premium that wasn’t used. That said, some insurers may charge an early termination fee that can eat into that refund amount.
Car insurance can cost you hundreds or even thousands of dollars every year, so it’s important to not only understand how car insurance works, but to also make sure you’re always getting the best rate available to you. If you haven’t checked lately to see whether there is a lower price available for you, now may be a good time to do it.
Follow these steps to ensure you get the process right and can maximize your savings with your new policy.