Updated June 1, 2020

How to Switch Car Insurance

Read more about Car Insurance

Switching your auto insurance is easy. But is it worth it? And what are the downsides? Find out everything you need to know here.

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Let's talk about everyone's absolute favorite topic: car insurance.

Just kidding. For most people, car insurance is something you don't want to think about. But if you've just been letting your policy auto-renew, you're probably paying more than you should.

Insurance companies change their rates all the time. The only way to keep up is to compare quotes every year. It takes a little bit of effort for a lot of potential savings. Find out how to make the switch to better rates down below.

Can you switch car insurance at any time?
Some carriers charge a small cancellation fee if you switch before your policy ends. If this is the case, compare the fee to the benefits you'll get with your new carrier. You may want to stick with your old insurance company until your policy is up for renewal.

Reasons to Switch Car Insurance Companies

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You can save a lot of money by shopping around and switching car insurance providers. But higher prices aren't the only reason you might want to change insurance.

Here are some good reasons to switch your car insurance:

  • Your rates went up
  • Bad experience with a claim
  • New car or driver on your policy
  • Make changes to your coverage limits
  • Moving to a different residence
  • Buying or renting a new home
  • Lack of options with your current company
  • You got married or divorced

You don't need to wait until marriage to shop for car insurance. If you're just curious about what else is out there, you can make the switch. Check out the 5 steps to get a new policy below.

Gather this info before you shop to streamline the process:
  • Your name, birthday, and Social Security number
  • Driver's license information
  • Vehicle Information Number (VIN)
  • Declaration page with all your current policy information

How to Switch Providers in 5 Steps

Shopping for car insurance takes a bit of time. But your potential savings will be worth the effort. Follow these steps to get the best bang for your buck:

  1. Decide your coverage limits. It's a good time to reconsider your coverage needs. Are your current limits enough in case of a serious accident? Are you adding a newer car that needs collision and comprehensive coverage? Take some time to carefully pick your limits.

  2. Find out how to cancel your policy. Contact your current provider to learn about the cancellation process. Most providers let you cancel for free, but some charge a fee. Make sure you have plenty of time to give notice to your current insurance company and research new companies.

  3. Get quotes from 3–5 companies. To get a good price, you need to know what other companies are offering. You can even bring up the lower quotes to your current insurance company. They might be able to find additional discounts to reduce your rates.

  4. Purchase your new policy. Double-check that your new policy is in place before you cancel your old one. Make sure you have your proof of insurance and keep it in a safe place. You don't want any gaps in your car insurance coverage.

    Don't let your car insurance lapse, even for a day. Gaps in coverage count against you. Car insurance companies can charge you higher rates even if you don't drive during the gap.

  5. Cancel your old policy. Confirm with your old insurance provider that your policy is canceled. Make sure your account isn't set up for auto-renewal. If you paid your premium in full, you'll get a refund for the rest of the policy term.

Having car insurance is a requirement for most leases and loans. Let your lease provider know ASAP that you switched insurance so they don't think you're uninsured.

Switching car insurance companies isn't always the best answer. If you're happy with your current provider, you can make changes to your policy instead.

Changing Your Car Insurance Policy

If you're just looking to make changes to your current policy, you can do that at any time. Insurers encourage policyholders to update their auto coverages after any big life change. This includes marriage, divorce, and buying a home.

Most coverage options can be changed at any point during the policy term. But some can only be changed when you renew your policy.

These include:

  • Accident forgiveness
  • Minor violation forgiveness
  • New car replacement

Talk to your insurance agent to learn if this restriction applies to any of your coverages.

Are There Downsides to Switching Insurance?

Changing carriers can earn you better rates, perks, and customer service. But it also means missing out on loyalty discounts.

Most insurance companies offer a discount to customers who stay with them for a long time. Sounds great. But it's not worth sticking with an insurer just for that discount.

Insurance companies can be tricky with their pricing. They might offer you a 15% discount while slowly raising your rates by 30%. In most cases, shopping around for car insurance is a good idea. You'll save money in the long run.

One downside to look out for is cancellation penalties. Some insurance companies charge an early cancellation fee if you switch before the policy renewal period. Make sure the amount you'll save with the new policy outweighs the penalty. Otherwise, wait closer to your policy end date.

There is typically no impact on open claims if you switch companies before the claim is closed. Your current insurer will still pay out the claim as it normally would.

No matter which provider you go with, car insurance might still be expensive. Take a look at these next tips to save even more.

How to Save on Car Insurance

Look for Discounts
Be sure to ask your insurance agent or carrier what discounts you qualify for. Types of discounts include:

  • Bundling
  • Safe driver
  • Good student
  • Drivers education
  • Auto-pay
  • Paperless billing

Keep a Clean Driving Record
A clean record means you're less risky to insure. Low risk equals lower premiums.

Improve Your Credit Score
Companies consider your credit when assigning your risk score (except in California, Hawaii, and Massachusetts). By improving your credit score, you also improve your risk score and lower your premium.

Shop Around
To get the best rates, compare quotes from different companies. You'll find the one that offers the lowest price.

Raise Your Deductible
A higher deductible will lower your monthly premium costs. But make sure it's an amount you can comfortably pay. If you get in an accident, you'll have to pay it out of pocket.

Bottom Line

There aren't many downsides to shopping for new car insurance. Sure, it isn't the most exciting way to spend your day. But you could be paying hundreds of dollars more if you don't comparison shop.

There's usually no penalty for switching car insurance companies, but review your policy to be sure. The most important thing is to avoid any gaps in coverage. Start your new policy BEFORE cancelling your existing one.

Even if you're satisfied with your current car insurance, review your coverage regularly. There could be discounts and other perks you aren't using. Your provider should offer enough coverage to protect you at a price you can comfortably afford.

Write to Caitlyn Callahan at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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