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How to switch auto insurance

You can, and sometimes should, switch your car insurance company. Even if your policy is not up for renewal, you can opt to shift your policy.

Sometimes, this can save you a good chunk of change. It doesn’t matter whether you’re getting full coverage or going with just state minimum coverage, also called barebones coverage. Insure.com found that the difference between the highest priced and lowest priced auto insurance is on average:

  • Full coverage -- $1,127
  • State minimums -- $497

Imagine how you could spend that money. Here’s how you may want to make a change, as well as pros and cons of switching. 

 

How to switch car insurance companies

Your momma told you…you better shop around. You have to, and it's the first step you need to take when and if you're thinking of switching car insurance companies. 

You might feel like you're cheating, but you've got to look for greener grass before you even tell your current insurer you've got a wandering eye. Especially if there’s no urgency, take your time. Compare prices and companies' reputations on customer service and other ratings.

There’s no such thing as going overboard in checking with different insurers. Dive in and compare as many policies as you can. 

Collect at least three to five quotes from different insurers. That can include captive agents, online-only and independent agents. You'll want to compare the average rates for your particular area, so you know what prices are considered competitive. Here are the average car insurance rates by state.

John Espenschied, owner of Insurance Brokers Group, said that saving between one insurance company and another can vary greatly -- sometimes between 10% and 50%.

"Auto insurance company rates can vary from year to year, depending on their prior losses and profitability," said Espenschied. "You might be with a company this year with a fantastic premium only to find at renewal a 20 to 40% increase. We recommend shopping at least every couple of years, to keep your current insurance company honest, if nothing else."

Several factors drive auto insurance rates: 

  • Age
  • Gender
  • Type of vehicle
  • Number of insurance policies
  • Zip code
  • Prior insurance
  • Insurance liability limits
  • How long with the previous carrier
  • Your credit

"Any one of these may change for you or the appetite for your insurance company," said Espenschied. "Your insurance company may decide they have too many policies in a zip code and want to slow growth by raising rates. Some car insurance companies work better for single people with one car and maybe a ticket and/or prior accident. Other insurance companies look for families with multiple vehicles, home, umbrella and life insurance, and will offer better rates for those folks."

While getting quotes, it's also a good idea to examine carefully whether your current coverage could offer you more discounts. Maybe your situation and needs have changed. This can include a new car, adding a teenager to your insurance, safety features in your vehicle, retirement and a host of other factors.

"You can switch insurance providers at any time but the best time to leave is when your policy term is over or nearly over," said Penny Gusner, consumer analyst for Insure.com. "Start looking in the month or at least a few weeks prior to your renewal date/end of current policy term so that if you find a company to switch to, you can switch as your policy term ends. Some insurers give an 'early-shopper' discount if you're shopping and switching in the weeks leading up to the end of your policy term."

If you cancel, it’s a good idea to have a day or two of overlapping. So, you would start your new policy a day or two before your other policy is set to expire. This is to ensure your new policy is in effect before you cancel your old policy.

"You don't want a gap in coverage," said Gusner. "In some states, even a day lapse results in a fine. Also, a day without insurance means if you're in an accident on that day, you're without coverage and would have to pay personally for damages or injuries."

Even if your policy term is ending, it’s wise (and may be required depending on your insurer's rules and your state's laws) to inform the company you're leaving and want to terminate the policy on a certain date.

Don’t assume they’ll terminate your policy for you. If you get an unexpected bill from your old insurer, don’t ignore it or it could wind up on your credit report. 

You may also face a small cancellation fee. GEICO, Farmers, Allstate and State Farm won't penalize you for canceling. Others? It depends on the state.

 

Why would you want to change auto insurers?

Gusner said there are valid reasons to look to alternative car insurance companies:

  • You have a terrible customer service or bad claims experience.
  • Your rates have increased.
  • You want to find lower rates.
  • Your insurance company's financial stability has fallen. (You want to pay your money to a company that will be around and can reimburse you if you make a claim.)
  • You have had a life event -- such as moving, getting married or divorced, or bought a house or a new car -- and want to shop around for cheaper or better insurance for your needs.

"Doing the leg work is worth it if you're going to save money or find a better company for your needs," said Gusner.

Of course, the predominant reason for wanting to switch insurance companies is generally to save money. Insurance company’s risk assessment methods vary widely. The result is your premium can swing dramatically.

You've got to look for a company that "likes" your risk factors, or at least one that forgives them the most.

 

Why not change auto insurers

We've talked about the numerous pros to swap auto insurance coverage. You're probably going to save money, might find the service is much better and step into a more technology-savvy company that offers better ways to keep in touch online.

But for some, no amount of money is enough to switch insurers. Switching might not be for you if:

  • You already have reasonable rates and love your current company.
  • You love your current policy’s perks that you would lose if you leave your insurer, such items you had to earn over the years like a vanishing deductible or accident forgiveness.
  • You're pleased with the service provided and the other company isn't known for its customer service.
  • You have bundled coverage and like the convenience of having everything with one company.
  • You have an open claim. "You will have to continue to work with your former insurer to complete the claim process,” Gusner said. 

"However, any of these reasons shouldn't stop you from comparison shopping and seeing about better deals and what is out there," said Gusner.

There are certain circumstances when it may be better to hold off on making a switcheroo. For instance, if you have been with an insurer for a long time and that insurer doesn't check your not-so-great driving record at each renewal period due to your loyalty.

"In this situation, it's normally not the best time to shop around and switch companies," said Gusner. "It is probably best to wait until the item drops off your record before thinking of switching."

 

How to shop for a new auto insurance policy

Pull up a chair, pour your favorite beverage and start looking around. The Internet is a good place to start. 

Espenschied said you can also ask friends and family for referrals. You can check with your local Chamber of Commerce. You can search online for nearby insurance agents. 

You can also check with organizations like the National Association of Insurance Commissioners for consumer complaints, licenses and financial strength.

Compare at least three quotes and feel comfortable before swapping insurers.  

"It's an educated guess by you that the new insurer will be a fit for your needs, but by doing the research -- and getting recommendations from friends and family -- you should feel confident in making the change," said Gusner.

You want to save money, but don’t just go with the cheapest deal. Before making the switch, do your homework. Don't switch if the company you found with cheaper rates isn't financially stable, Gusner stressed. 

Check the financial stability with companies that rate the financial strength of insurance companies, such as A.M. Best and Standard and Poor's. If a company doesn't appear to be stable, don't switch to it. Also, check Insure.com’s Best Car Insurance Companies

When obtaining the insurance quotes, it's helpful to have your current policy in front of you so you can compare apples-to-apples for rate comparisons.

"If you want to change any of your coverages or deductibles, get a new rate quote from your current insurer," reminded Gusner.

Here’s what to do and what not to do when switching auto insurance companies:

DO

  • Shop around to see if you can find a lower price.
  • Research the new company to make sure it’s worth the change.
  • Let your old insurer know you want to cancel your policy; don't assume they will cancel it for you.
  • Make sure you compare the same coverage when shopping around.
  • Inform your car’s finance company of the change if you switch, if you have a car loan. 
  • Notify your old insurer when to cancel your policy.
  • Remember to swap out your ID cards and download the app for your new company.
  • Confirm all discounts based on your situation and people on the policy. 

DON’T

  • Cancel a current policy before a new one is in effect.
  • Change an insurer based on price alone; investigate other factors -- such as financial stability.
  • Switch to a company that is unknown to you until you do your research.
  • Be scared to try out a new company if your research shows it should be a good fit.
  • Worry about losing a bundling discount by switching if your new company has lower base rates or other discounts that make it cheaper (or if the other company is just a better fit for your needs).

"Buying insurance with a new company can be a leap of faith," said Gusner. "If you like your company now, there's no guarantee you'll like the next company better. But if you have issues with your current insurance company, search for a company that exceeds in the areas yours is lacking. Look for a company that has good reviews and word of mouth on the items you care most about. If you've had lousy customer service, hunt for an insurer with stellar reviews in that area and it's likely to be a better fit. If you are looking for perks like a vanishing deductible or a single deductible if you bundle coverages, then a company that offers these items will be a better fit than your company that doesn't."

You can also use Insure.com’s Auto Insurance Advisor. The tool asks you a handful of questions to figure which coverage you need. The advisor will help you figure out a policy if you want to switch auto insurers. 

 

How to cancel your current car insurance policy

If you’re making the switch, follow these steps:

  • Choose a date for the new policy.
  • Notify your current insurer in writing with the date you want to cancel. Include your policy number. The company may send back an electronic cancellation form via email for their records.
  • Ask your insurer about possible refunds coming to you and cancellation fees.
  • If your car is leased or financed, make sure you tell the finance company about the change.

"Again, I suggest that you have a couple of days overlap to confirm the new policy is in effect and then cancel your old policy," stressed Gusner. "Sending a written cancellation to your company is the best way to make sure they're aware you want to terminate your coverage with them."

But really, experts say the "canceling" part is a piece of cake. Your new company is excited to have you and is more than happy to facilitate the changeover.

"Switching insurance companies is a pretty simple process," said Espenschied.

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