Yes, you can switch car insurance after an accident.

Why would you change insurance after an accident? Perhaps you were recently at-fault in an auto accident and you’re not loving the service you’re getting. Or maybe you were thinking of switching companies and you’re wondering if that’s still an option after a crash.

You can change your car insurance company even with an open claim for an accident, though it’s not ideal. Here’s why -- you’ll have to work with two companies.

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You cannot cut ties with your old insurer altogether if you switch car insurance companies after the accident; you’ll need to cooperate to get outstanding claims settled. Your previous insurer should work the claim the same whether you’re still with the insurer or not and would still have to defend you in lawsuits related to the accident.

Something you cannot do is try to change your insurance company and file a claim under that new policy for the accident. The car insurance company you have at the time of the accident is the one that handles the claim if you were at fault for the accident. If you weren’t at fault, you can normally place claims against the at-fault party’s liability coverage.

You also cannot switch your coverage limits or deductible after an accident to help you for an incident that already happened. The coverages, limits and deductibles at the time of the accident are what will be in place for any claims. Trying to make policy changes and giving a later date or time for the accident is insurance fraud.

Switch insurance companies at any time

Just because you were in a car accident doesn’t mean you’re stuck with the insurance company you had at the time of the crash. You have the right to change your car insurance provider whenever you want.  Most people shop around and switch insurers at the end of their policy term, but you can do it at any time.

We wouldn’t recommend making any changes on the same day as an accident. That may seem suspect to a new company, but instead, wait until after claims process has begun. You’ll continue to work with your old insurer even while starting a new policy elsewhere.

Things to consider before switching insurance companies after accident

Just because you can switch car insurance companies at any time doesn’t mean that you should.

If you’re hoping to change companies to avoid hiked premiums due to the accident, that may not happen. It’s true that each insurance company has its own way to calculate premiums based on how it weighs various risk factors, but you may find your current insurer will save you in the short run.

You will be asked about accidents so don’t fib

If you’re racing to get a new policy in hopes to save before the accident gets on your record or claims hit your claims history, it may be time to pump the brakes.

When applying for a new insurance policy, you’ll be asked a series of questions to determine your risk. Those questions include ones about your driving record, accidents and claims. Most insurance companies ask about the last three to five years of driving, including speeding or traffic tickets, and accidents and claims.

Attempting to get lower rates by deliberately giving misleading answers or omitting information, such as “forgetting” about that accident last week, is considered insurance fraud. You can get trouble into with state and you’ll lose that new cheaper policy.

Once the insurance company finds out about your omission, which is extremely likely as companies gather very detailed reports when checking an applicant, your policy is going to change. It may get canceled back to the effective date, leaving you uninsured.  If it’s not canceled, the company can re-calculate your rates based on the updated information and send you an additional premium notice, which you must pay or lose the policy. That claim may be denied if you’ve put in a claim with the new insurer before it discovered the  fib.

Your insurer may be the cheapest…for now

You may be worried about how your rates will rise after the accident with your current insurance company, but when shopping around you might find it is actually the cheapest company.

One reason is that though your insurer knows about the accident and associated claims; in most states, insurers cannot make mid-policy changes to your premium, so your rates won’t go up until your next renewal period.  Other insurance companies can rate you on the accident immediately because you have to tell them about it in the application process.

At renewal time, you’ll likely see your premium go up due to the accident. Once you get that rate quote from your insurer, you can shop around to see if other companies can beat the rate, while still giving you the same coverage and service. Compare apples to apples and determine what company is best for your needs and wallet. It could be that another company doesn’t rate as harshly for accidents as your current one.

Insure.com data shows that on average rates go up 31% (around a $450 increase annually) for one at-fault accident with more than $2,000 in damage.  If the damage is under $2,000, it’s a bit better at only 26% (about $366 more annually). 

Loss of discounts and perks

Changing car insurance companies after an accident means you may lose out on some discounts. Some insurers offer a loyalty discount for renewing with them year after year (normal range of 3% to 4%) or a discount for the amount of years you’ve stayed with them (range of 2% to 5%). 

If you have your home and auto insured with the same company and are breaking up this bundle, you could lose a discount of around 11%.  You also would have two insurance companies to deal with instead of one.

Then, there are the perks. Do you have accident forgiveness with your current provider? If so, it may be worth taking advantage of that for this accident instead of changing insurance companies. What about a vanishing deductible? It typically takes at least a few years to become eligible for that perk with a new insurance provider, so you may lose it if you change insurers

Switching car insurance companies after an accident may still be worth it, but take into account the pros and cons of changing before making the leap. It’s quite possible there could be even more discounts and perks with a new car insurance company, just do your research so you’ll be completely happy with your decision.

Will there be a cancellation fee?

If you paid in advance for your insurance policy and you’re canceling it to move to a new insurance company, you should receive a prorated refund.  However, you may end up owing a cancellation fee.

Some insurance companies charge a penalty for canceling your policy before the end of your term. Typically, the penalty is around 10% of your remaining premium, though some charge a flat fee, such as $25 or $50. Thus, if you’re changing to save money, make sure it’s still worth it with the cancellation fee factored in. If not, see about waiting to switch at the end of your policy term when this fee will not apply.

Don’t switch until a new policy is in place

Switching insurers can be a smart move and even save you hundreds of dollars, but having a lapse in coverage is not wise. Even a one-day gap in car insurance can be seen by insurance companies and make you seen as a higher risk, which results in higher rates. We’ve found that auto insurance policies tend to cost about 9% more if you have a lapse of coverage on your record.

Also, a lapse in auto insurance coverage is against the law in most all states.  Some states start to hand out penalties, such as fines if you’re without car insurance on a registered car for just one day. 

The best way to make the switch is to put in place the new policy and then cancel your old policy. An overlap of policies for a day or two is best so you know the new coverage is in place; then, it’s time to reach out to the old company to ask to be canceled. 

Find out your insurer’s requirements to cancel. For instance, do they need something in writing in the mail, do they accept email requests? If you fail to cancel your old policy, the insurer will normally continue to bill you and at some point, cancel you for nonpayment, which is a black mark on your credit report.

Even if you’re switching companies at the end of a policy, you need to make your insurer aware if you’re changing carriers or your policy may auto renew and you run into the same issue. Give notice to your company and get confirmation they received your request.