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Switching Car Insurance Companies in 7 Steps

Sept. 18, 2020
Auto Insurance, Insurance
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If you’ve ever bought auto insurance, you’ve probably considered switching car insurance companies. Although it’s likely not a top priority (let’s face it, it’s not exactly glamorous), this might spur you into action: Consumers saved an average of $560 per year by switching, according to self-reported savings from QuinStreet customers in the U.S. Your rates may vary depending on your situation.

But making up your mind to switch car insurance companies is only half the battle. Here’s how to make sure the transition goes as smoothly as possible.

» MORE: 8 ways to get the cheapest car insurance rates

How to switch car insurance companies

1. Compare auto insurers

Get quotes from at least three insurers if you’re considering switching car insurance companies. When comparing rates, review and match policy features — things like coverage types, limits and deductibles — to your current policy.

» MORE: Car insurance quotes: What you need to know

Be on the lookout for perks or freebies that could pay off later. For example, Erie includes accident forgiveness (depending on the state) in its auto insurance policies. NJM includes new car replacement, which pays for a brand new car of the same make and model if yours is totaled or stolen, minus the deductible.

» MORE: The best car insurance companies for 2020 

2. Research the company before you switch

While price is important, don’t overlook other factors like customer complaints and coverage options when picking your auto insurer. Otherwise, you might end up with a great rate, but find yourself switching companies in another six months because of a frustrating claims experience. Check out our best car insurance companies for 2020 for a list of auto insurers that put the consumer first.

3. Contact your current auto insurer

Before you commit to making a change, talk to your insurer and see if it’s willing to match your lower offer. If it can’t provide a better rate, find out how you can cancel and request the policy end date in writing. In some cases, you might need to provide a written request to end your policy.

When you start a new policy, it’s important to proactively cancel your old one rather than simply stopping paying the bills. Otherwise, your former insurer may continue to bill you and ultimately report your failure to make payments, which could ding your credit score.

» MORE: How to pause, cancel or reduce your car insurance

4. Ask about cancellation fees and refunds

Find out upfront about any fees or possible refunds from your current insurer. Many companies allow you to cancel for free at any time, but some might charge a fee if you cancel mid-policy.

You may get a refund if you switch well before your policy runs out. For instance, if you paid for a six-month policy but decide to switch after four months, your insurer should reimburse you for the remaining two months’ worth of coverage (minus any cancellation fee).

If you are entitled to a refund, your insurer ideally will pay it with no fuss, but customers occasionally struggle to get back what they’re owed. Address this issue right away when you cancel your policy and follow up with your insurer in case of delays.

5. Avoid a coverage gap

Insurers charge significantly higher rates after a lapse in coverage, so make sure you have car insurance at all times. It’s also important to set your new policy to begin the same day your old one officially ends because if you get in a car crash during a gap, you’d have no coverage.

Many insurers offer a discount for having continuous coverage, even if you’re switching companies. Some companies require you sign up for a new policy seven days before the term ends to qualify, so keep this in mind when determining your start date.

6. Change out your ID cards

Don’t forget to swap out your old car insurance ID cards with fresh ones from your new insurer. Every state (and Washington, D.C.) except for New Mexico now allows digital proof of insurance, and a growing number of insurers allow you to download a digital ID card on your phone. This makes it convenient to get your ID cards, but it also makes it an easy chore to put off. You might simply forget to print them if you opted for electronic documents that are stored online.

7. Let your leasing company or lender know about your switch

If you have a car loan or lease your vehicle, you may be required by your lender to have a certain amount of insurance coverage, including comprehensive and collision. Because the lender or leasing company has a financial stake in your car, they will want to make sure it’s covered by insurance. Naturally, then, it’s important for the lender to stay privy to any changes. Otherwise, it may think you don’t have the required insurance. Ask your new insurer to send proof of insurance to the lender or leasing company as well as to you.

When to switch car insurance companies

Aim to compare car insurance rates at least once a year to get the best deal. But you don’t need to wait until your policy ends to make the switch. You can change companies whenever you want: mid-policy, at the end of your term or even two days into your term.

» MORE: How often should you shop around for car insurance?

You can even switch companies if you have an open insurance claim, but your current insurer will still be responsible for handling it.

Other common times when you may want to switch car insurance companies include when you’re:

  • Experiencing poor customer service.
  • Seeing a spike in your car insurance premium.
  • Planning to move.
  • Adding a new driver to your policy (for example, if you got married or want to add a teen driver).
  • Buying or adding a new car to your policy.
  • Seeing a drastic increase or decrease in your credit score — unless you’re in California, Hawaii or Massachusetts. Those states ban car insurers from increasing rates depending on credit information.
  • Increasing or reducing coverage.
  • About to renew your policy.

Even if none of these situations apply to you right now and you’re happy with your company, it’s worth taking the time to shop around. Some auto insurers use a practice called price optimization to charge loyal customers higher rates because they’re less likely to switch companies.

Keep in mind that your car insurance rate will stay the same during your entire policy. For example, even if you receive a speeding ticket, get into an accident or have another violation in the first month of a six-month term, your rate won’t increase until you renew.

Because of this, switching car insurance companies immediately after a traffic violation will likely result in higher rates. However, once you find out the cost of renewal with your current insurer, you can shop around to make sure you are getting the best price. NerdWallet recommends you compare rates one, three and five years after a violation.

» MORE: How much car insurance rates go up after an accident

Can you switch companies too often?

In general, you won’t be penalized for switching car insurance companies, no matter how often you change insurers. Although most companies will let you cancel for free at any time, waiting until the end of your policy will avoid any cancellation fees.

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