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Avoid These 6 Mistakes When Switching Car Insurance

July 18, 2016
Auto Insurance, Insurance
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If you’ve ever bought car insurance, you’ve probably considered switching insurers. Given how quickly rates can spike — and the glut of competitors to choose from — there’s incentive to look often for a better deal. You also may want to swap policies if you’ve received poor customer service or are moving to a state outside your insurer’s territory.

But making up your mind to switch car insurance companies is only half the battle. Here are six mistakes to avoid to make sure the transition goes as smoothly as possible.

1. Not confirming what your new policy includes

Before you jump at a low quote from a new insurance company, make sure you know exactly what you’re getting. “Some companies may offer a lower rate, but the quote may be for less coverage than you currently have,” says Robert Passmore, assistant vice president of the Property Casualty Insurers Association of America, an industry trade group. If you end up having to increase your coverage after you buy the new policy, the cost will be higher than you initially thought, he says.

To avoid this kind of confusion, review and match the features — including your coverage types, limits and deductibles — of any potential new policies to your current one when comparison shopping. Passmore suggests sending prospective insurers a copy of your current declarations page, which lists the key particulars of your policy, and letting them know that’s the coverage you need for your car insurance quotes.

2. Leaving a coverage gap

Set your new policy to begin the minute after your old one officially ends. Otherwise you would have no insurance to pay for any damages if a car crash happened during a gap.

There’s another risk associated with having a gap in your coverage, Passmore notes: If you switch insurers again someday, it could cost you more. Companies may look at your car insurance track record when they determine your rates, and drivers who have been continuously insured tend to get lower prices.

3. Failing to cancel your old policy

When you start a new policy, it’s important to proactively cancel your old one (and, ideally, receive written confirmation) rather than simply stop 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: Improving your credit can help you save on car insurance

4. Missing out on a refund

If you paid for your old policy upfront, Passmore says, you should get a refund for the coverage you won’t use. 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, according to NerdWallet’s research into consumer complaints. Address this issue right away when you cancel your policy and follow up with your insurer in case of delays.

» MORE: Car insurance comparison tool

5. Forgetting your new ID cards

In your haste to switch companies, don’t forget to swap out your old car insurance ID cards with fresh ones from your new insurer. A growing number of insurers and states allow you to download digital proof of insurance on your phone — which makes getting your ID cards convenient, but also an easy chore to put off. You might simply forget to print them if you opted for electronic documents that are stored online.

If you’re pulled over and don’t have valid proof of insurance, you could face a fine, says Passmore, or at least an inconvenient trip to court to prove you have coverage. “If you’ve ever been in traffic court,” he adds, “you know what a horrible way that is to spend a day.”

6. Keeping your leasing company in the dark

If you leased your vehicle, your lessor may require a certain amount of insurance coverage. The leasing company also is named as a loss payee on your policy, says Passmore, which means it could be entitled to a portion of your claim payment to cover the balance of your lease if the car gets totaled. Naturally, then, it’s important for your lessor to stay privy to any changes. Ask your new insurer to send proof of insurance to the leasing company as well as to you.

» MORE: Is gap insurance worth it?

Thinking of switching car insurance? Start by shopping around

If you’re looking to save money on your auto insurance policy, switching companies can be an easy way to save big.

Switching Car Insurance: Savings at a Glance
Source: A 2015 NerdWallet study
Average car insurance cost for good drivers$1,847 per year
Average percent savings by shopping around47%
Average dollar savings by shopping around$859 per year
Portion of customers who have never compared rates38%

“Shopping around is never a mistake,” says Passmore, and sticking with the same insurer out of complacency could be costing you hundreds of dollars a year. Try out NerdWallet’s comparison tool to get quotes from top insurers and find out which one has the lowest rates in your area.

Alex Glenn is a staff writer at NerdWallet, a personal finance website. Email: [email protected].

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