How to Switch Car Insurance and What to Consider

Knowing how to get car insurance is essential for car owners for your own protection and depending on where you live and whether you financed your vehicle purchase, it may be required.

But I’ve learned that sticking with the same car insurance company for a long time isn’t always the best idea. Not only do insurance companies raise rates, but 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

I think it’s always a good idea to shop around once every year or two to make sure you’re getting the best rate available. But there are some life events that may make it worth your time to look at car insurance quotes from new insurance companies, including:

• You recently moved. Your location is a major factor in your car insurance rates. If you live 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. It’s also possible another insurer carrier may offer a better rate for that area.
• You got married. Insurance rates are sometimes higher for single versus married drivers. It’s worth shopping around once you’re married to see if you qualify for lower rates.
• Your policy renews soon. 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, consider checking 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 getting your current policy, you may save more money switching car insurance companies since your current insurer probably won’t check your credit again.

Evaluate your current coverage before switching

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 what type and amount of coverage would provide peace of mind. For example, if you don’t have enough liability coverage and you get in an accident, it could wreak havoc on your finances. However, if you have too much coverage, you pay for something you don’t need.

If you decide you have too little or too much coverage, you can switch it up with your current insurer. However, this is also a great time to shop around and see what options are available because you might save even more money.

Check for early cancellation fees

Most auto insurance companies allow you to cancel your policy without incurring an early termination penalty or cancellation fee. Most companies also typically provide a refund of the unused portion of your insurance premium.

However, just like every company has different premiums and factors that affect them, some insurance companies may charge an early cancellation fee.

Don’t worry, you can still switch car insurance if your policy has an early cancellation fee, you just need to run the numbers and see if the savings outweigh the cost of changing policies. You never know when 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.

Comparison shop

Shopping around is the best way you can save money on car insurance. Every insurance company focuses on different factors and offers different discounts that could affect your premiums. Inquire about all discounts and compare your options between insurance companies.

I suggest comparing rates from at least three or four insurance companies to maximize your savings. Some insurance websites even offer a comparison tool that will do some of that work for you. You enter all your information once, and you’ll get quotes from multiple car insurance providers to compare.

To get car insurance quotes, you’ll need the following:

• 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)

Keep in mind, the information you get from an insurance company is simply a quote. If you decide to move forward with a specific offer, you must provide your documentation and they will underwrite your application. This may result in a slightly different quote than they originally provided.

Once you have multiple quotes, you can use them to get better rates either with your current insurance company or a new one. Some companies are willing to negotiate.

Switch to your new insurance company

The most important factor to remember when switching car insurance is never to have a gap in 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.

So before canceling your current coverage, make sure the new coverage is effective. As you set up your new policy, consider the following:

• Is there a pay-in-full discount? Some insurance companies offer a significant discount if you pay the full six month premium upfront rather than monthly. If you can afford to pay it, you can save a decent amount of money.
• Is there an automatic payment discount? Some insurance companies offer a discount if you set up auto pay versus making them yourself.

Cancel your old insurance

Once you’re sure your new policy is in full effect, cancel your old policy. This doesn’t mean just stop auto pay or stop making payments. You must let the insurance company know you want to cancel your coverage, which is best to do in writing. If you don’t tell them, but just stop making payments, they could report you to the credit bureaus for non-payment.

Here are the steps to cancel your old insurance:

• Call your old insurance company and inform them you want to cancel
• Write down the confirmation number they provide
• Follow up the cancellation with a written confirmation
• Log into your old online account and remove your payment information to avoid accidental payments

Having a paper trail of your desire to cancel the insurance policy provides you with a paper trail should you need to dispute a negative item on your credit report.

Print out your new policy insurance card

It’s imperative that you have proof of your new car insurance, should you get into an accident or are stopped by the police. Your new insurance company may mail you new ID cards, but you can usually print them or have a copy on your phone instantly.

It’s best to have a paper ID card in your car, but either a picture of the new ID card or access to it through the insurance company’s app can work in a pinch too.

FAQs

Bottom line

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 also how to get the best rates. If you haven’t checked lately to see whether there is a lower price available, now may be a good time.

I make it a habit to check my car insurance rates annually, right before my renewal, because it’s easy to remember, but you can do it whenever you feel it’s best.

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