How to Switch Car Insurance Companies

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.

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.

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.

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?

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.

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.

** 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. *

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.

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.

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.