There are many good reasons to change car insurance companies. A life event may require you to switch companies, or you may want to look for savings on your monthly bill or a better service experience.
Switching providers is just a matter of finding a new insurance company, buying a new policy and contacting your current company to cancel your existing policy. Your current insurer will allow you to switch your car insurance any time before your renewal date. But before you switch, you should follow five important steps.
The five steps MoneyGeek recommends taking to ensure a car insurance switch is a good idea: figure out how much coverage you need, research fees and refunds, compare quotes, avoid insurance lapses and swap out identification cards.
MoneyGeek has researched the pros and cons of switching car insurance and found that certain drivers can benefit from exploring the idea of changing companies, even if they don't necessarily need to switch insurance. For instance, drivers can save hundreds of dollars per year by switching to a more affordable insurer. You may also benefit from changing companies if you're unsatisfied with an insurer's service experience, or if a major life event requires you to find a new insurer.
Switch car insurance companies when you think you can save money or get better service. You can do this any time, but especially when your personal circumstances change.
Make sure your new insurance is active before canceling to avoid any lapse in coverage.
You can change your car insurance at any time, typically with no or limited penalties.
How to Switch Car Insurance
Switching car insurance is relatively straightforward. All you need to do is get a new policy and contact your current insurer cancel your current policy. Your current insurer is likely to give you a pro-rated refund of the remaining balance of your car insurance term, though some insurers do charge a small cancelation fee. One important consideration is to make sure that when your old policy ends your new policy starts right away. Car insurance lapses can be costly in the long-run.
YOU CAN CHANGE YOUR CAR INSURANCE ANY TIME - BUT SHOULD YOU?
You can usually change your car insurance company in a matter of hours. Before moving on from your current insurer, consider two questions:
Do I have a good reason to switch car insurance? There are plenty of good reasons to switch car insurance, including savings on your premium and trying to find better service quality, but you should make sure there's a better option out there.
Have I done all my research? Switching car insurance is easy, but beyond the basics there are five key steps you should take. These steps will ensure you get the best deal with a policy that fits your needs.
Reasons to Switch Car Insurance Companies
There are plenty of reasons to change car insurance providers when your currently policy ends or even mid-policy. You should consider switching car insurance if you can get monthly savings, you can get better service quality or if a life event changes your car insurance needs.
Three Reasons to Switch Car Insurance
You're looking for savings on your car insurance premiums. It doesn't take long to compare multiple companies online to find the cheapest car insurance coverage.
You're unsatisfied with your provider's service and are looking for a higher quality service experience. MoneyGeek has analyzed the best car insurance companies to help you find the best fit.
Sometimes changes in your life mean it may make sense to switch car insurance. For instance, if you move to a new state your old insurance company may not be available.
If your current policy is expiring soon, it may make more sense to switch when your current car insurance ends. An insurance company might not refund you for the remainder of your policy and may even charge a small cancellation fee. But if the benefits of joining the new insurer outweigh costs, you should still consider making a switch mid-policy.
Even if you're currently satisfied with your rates and service, notable life events may force you to change insurers, or may just be a good time to assess whether you have the right company. For instance, if you move to a new state, your current car insurance company may not cover you in your new home. Even moving within a state may alter your rates, and it may be worth examining your options in your new town or city.
Another reason to switch is if you add a family member to a policy or have purchased a new vehicle. The following life events are usually a good time to do some research on which insurance company best fits your circumstances:
Adding a young driver to a policy
Purchasing a new vehicle
When Shouldn't You Switch Car Insurance?
If you've examined all the alternatives and your current insurer offers the best combination of coverages, rates and service, it may make sense to stay with the same insurer. The risk of changing car insurance companies is that you won't get a refund on your current policy and that your new policy doesn't offer you better value for your money.
TIP - CONSIDER OTHER INSURANCE POLICIES TOO
When making a decision to change car insurance, you should also consider other insurance policies you hold. For instance, most people find the cheapest home and auto insurance when they bundle those two policies together with the same insurer.
If you have other insurance policies like homeowners insurance, renters insurance or umbrella insurance, you'll want to compare quotes to see if the cheapest options are those with bundling discounts. Not all insurance companies offer the same level of bundling discounts, which can be as high as 25% of your premium.
To ensure you find the best policy, MoneyGeek has detailed all the steps you should take when deciding whether to change car insurance companies.
Steps You Should Take Before Switching Car Insurance Companies
Because of the ease of online research and purchasing, switching car insurance should be a breeze. Follow the steps outlined below to help you narrow down the best car insurance companies for your needs.
The type of insurance you decide to carry depends on how much your state requires and how much coverage you want in the event of an accident. The state minimum is how much any driver must carry, while liability insurance offers protection for any damage you cause to others. Full coverage auto insurance pays for damages caused to both yourself and others by adding comprehensive and collision coverage.
The level of coverage you need depends on your car's value, the coverages required by your leasing company or lender, the value of your assets and several other factors. The table below shows how much car insurance costs depending on your level of liability insurance and whether you buy comprehensive and collision insurance with a $1,000 deductible.
Insurers use shorthand terms for liability limits. For example, a 50/100/100 liability policy is one that protects you for $50,000 in bodily injury liability damages per person, $100,000 in bodily liability injury per accident and $100,000 in property damage liability per accident. Understanding your liability limits helps you to understand how car insurance works.
Average Car Insurance Costs by Coverage Type
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State Minimum - Liability Only
50/100/100 Liability Only
100/300/100 Liability Only
50/100/100 Liability Insurance with Comprehensive and Collision
100/300/100 Liability Insurance with Comprehensive and Collision
Evaluate Cancellation Fees and Refunds
Insurance companies may charge you a cancellation fee if you end your policy early, but you may also be eligible for a refund of the remainder of your policy. Just because you may pay a penalty for cancelling doesn't not mean you shouldn't switch. If the monthly savings and refund are higher than the cost of a cancellation fee, it may make sense to switch car insurance companies right now, even if you are mid-policy. Of the largest 10 car insurance companies in the country, MoneyGeek found that that fees are rarely disclosed:
No fee: GEICO and USAA
Cancellation fees are undisclosed: Allstate, State Farm, Liberty Mutual, Farmers, Nationwide, Travelers and American Family
Fees: Progressive (Up to 10% of remaining premium)
However, just because fees are undisclosed does not necessarily mean there is a fee. Fees can differ by location and it's very possible your insurer will offer no fees and a full refund.
Many companies process refunds and fees automatically but always keep an eye on your account to ensure the money arrives. If not, you may need to call the company or, if possible, use an online chat feature on their website. A few things to say or ask when calling include:
What amount was left on the policy the day I canceled?
What percentage should I expect to get back?
How will the money be sent?
How long will it take to arrive?
Research and Compare Car Insurance Quotes
If you want to save money on your auto insurance, comparing quotes from multiple car insurance providers is one of the smartest things you can do. Reaching out to several insurance companies and providing information specific to you (e.g., age, gender, type of car, etc.) can provide a clearer picture of what to expect. If you haven't shopped around in a while, you may qualify for new discounts with different companies.
Remember, price shouldn't be the only factor. If you value quality service in a time of need, the best insurance company for you will also have a low rate of customer complaints and a high rate of customer satisfaction.
Find the Best Rates for Your Driving History
Comparing quotes is especially important if you have a blemish on your driving record, as high-risk drivers pay more for insurance. Switching car insurance after an indiscretion falls off your record could be a good decision and lead to a significantly lower rate. Even if an incident appears on your driving record, it's still worth it to shop around.
Car insurance quotes can vary greatly depending on the severity of your violation, as the table below demonstrates.
Average Annual Premium by Driving Record
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** The average driver is defined as a 40 year-old male w/ no violations. All policies in this table have 100/300/100 liability insurance and comprehensive/collision coverage with a $1K deductible. *
Buy a New Policy First to Prevent a Lapse in Coverage
Before you cancel your existing your car insurance policy, you should buy the new car insurance policy first. A lapse in car insurance coverage could result in rate increases of hundreds of dollars per year with your next insurer.
A lapse in coverage occurs when you have a period of time in which you don't have a car insurance policy. Penalties are more severe if your car insurance lapses for more than 30 days, but even going one day without coverage can result in limited penalties.
Before ever canceling your current policy, your new one must be active. After identifying the new company, you want to provide your auto insurance, pay the quoted premium and ask for confirmation. Ensure that the date your new policy starts matches the day the old policy ends. Planning this in advance, rather than buying car insurance on the same day it expires, can help you save money in the long run.
You can also ask for a digital copy confirming your coverage until mailed copies arrive. Only after you receive this documentation should you contact your previous insurer and notify them of your desire to cancel the policy.
Swap in Your New ID Card
Lastly, remember to swap out your old insurer's identification with your new one. Doing this may involve changing them out in your wallet or glove box or downloading your new insurer's app to carry a digital copy.
Frequently Asked Questions About Switching Car Insurance Companies
If you still have questions about the process of switching car insurance companies, check out answers to some of the most frequently asked questions below.
It depends on the company that currently insures your car. Most insurers do not charge a penalty, but you should check to be sure before making any decisions.
It depends. Some companies offer refunds on the remainder of the canceled policy if you paid in advance. It may not be a full refund but should include most of the remaining balance. If the company charges penalties, these will be deducted from the refund.
Yes, once a claim has been filed, you can switch insurers. The claim will remain with your previous insurance company rather than it transferring to your new insurer.
To avoid a lapse in coverage, you should always make sure you pay your insurance premiums on time. Before canceling your old policy, ask for written confirmation from your new insurer that the new policy is active.
About the Author
Katy McWhirter is a professional writer and owner of Heritage Creatives, a boutique historical branding agency. She has experience in nonprofit management, marketing, personal finance, government relations and education from her decade-plus writing career. Katy’s work has been featured in both the United States and abroad, highlighting the need for research-driven, accessible information on financial topics.
Katy earned her bachelor’s degree in social entrepreneurship from Belmont University in Nashville, Tennessee, and her master’s degree in modern history from the University of York in England. She spends her free time with her husband and two cats, restoring their 1901 home in Louisville and reading up on all things personal finance.