How to Switch Car Insurance Without Penalty Fees

In today's economic climate, many people are searching for a way to increase their spending power by saving money. Switching car insurance companies is a great way to help you get the most for your money. Switching car insurance can get you the most affordable coverage and put some extra cash back into your pocket. It doesn't have to be difficult either. Just enter your zip code and get a quote for free. No credit cards are required either!

Switching insurers can get you the most affordable coverage and put some extra cash back into your pocket.

How Often Do People Switch Their Car Insurance?

A 2015 auto insurance study found that the average American driver hasn't switched their car insurance coverage in 12 years. This study also found that:

  • 1 in 4 people have been with the same insurance company for 16 years

  • 7 percent of people have had the same company for 30 years

  • 36 percent of drivers never shop around for auto insurance

Why Shop Around?

Shopping around for new coverage can help you find a policy that's more affordable and matches your needs. If you're switching car insurance companies soon, it helps to understand the process to avoid making mistakes and potentially paying penalty fees. In this article, you'll learn how to switch car insurance companies without paying a fine.

When Should You Switch Car Insurance Companies?

Shopping around for an auto insurance policy with lower rates is always a great way to save money on your policy. Car insurance providers are most likely to raise or lower your rates when you experience a significant life change.

If you've experienced a major life event, it may be a great time to consider switching car insurance companies.

If you've experienced a major life event, it may be a great time to consider switching car insurance companies. If student loans are kicking in and you want to see if you can save money elsewhere, car insurance is a good place to start. Here are some events that insurers use to raise or lower auto insurance premiums under their underwriting guidelines.

Your credit score changed significantly

Some states allow car insurance companies to consider credit-based insurance scores to determine someone's policy rates. Good credit scores translate into lower rates for customers. Low credit scores will mean higher rates.

If your credit has improved, you may be able to get the same coverage at lower rates from another car insurance company.

Has your credit has changed since the last time you've paid your premium? You may be able to get the same coverage at lower rates from another car insurance company. Only three states, California, Hawaii and Massachusetts, ban insurance companies from using credit scores to determine rates.

Your marital status changed

Married people are more likely to pay less in car insurance rates than widows, divorcees and single people. You may be able to get lower premiums if you recently tied the knot.

You added or removed a driver or vehicle from your policy

Do you have a new driver in your home like a teenager who recently got their driver's license? As a rule, adding drivers or vehicles to your car insurance policy will increase your premium. If you remove them, it will lower your car insurance premiums. You can switch car insurance companies if you need to find more affordable rates.

You purchased a new home

Insurance companies see homeowners as less of a risk than non-homeowners. Whether or not it is unfair, they view them as more financially responsible and less risky than their counterparts. Carriers charge homeowners lower rates.

You moved to a different city

Another thing that insurance carriers consider when calculating your rates is your location. They use your zip code to investigate demographic data like crime rates, auto accidents, vandalism and other factors. Have you recently moved to a safer neighborhood in a different area? Your insurance carrier will consider your new location when calculating your rates.

You need a specialty car insurance policy for your vehicle – If you own a vintage automobile, sports car or classic vehicle, you may need to purchase a specialty policy to protect your automobile. You may need a different insurer if yours doesn't offer classic car or sports car insurance.

You're experiencing poor customer service with your current insurer

If your insurance company has provided less-than-stellar customer service to you, it may be time to switch carriers.

If your insurance company has provided less-than-stellar customer service to you, it may be time to switch carriers. Search for insurance companies with a reputation for putting their customers first.

Your insurer didn't pay an insurance claim

The best insurance companies abide by their contracts. If yours didn't and you want to switch, you can do so at any time, but you'll avoid penalties if you do so just before your coverage term ends.

An insurance carrier recently increased your rates

Your insurance company may raise your rates for various reasons. They can raise your rates if you have had a recent speeding ticket or at-fault auto accident. Some insurers will increase your rates more than others.

Schedule a time to speak with your insurance company to find out why they hiked your premiums. Ask them if there are any discounts that you may qualify for with their business. If they increased your rates because you filed an insurance claim, consider searching for another insurance company.

You can start your search for lower car insurance premiums using an online auto insurance comparison engine like SmartFinancial. Shopping using these comparison tools can save you up to 40 percent on your car insurance rates. We can get you car insurance quotes from some of the nation's leading car insurance carriers. Just enter your zip code to get started today.

Can You Switch Car Insurance Companies if You Have an Open Claim?

Yes. The insurance company will still have to pay the claim, even if you cancel coverage. Switching insurers doesn't impact your open insurance claims, and there is no penalty for doing so. You will still have to deal with different car insurance companies until your old insurer resolves them.

Does it Make Sense to Switch Insurance Companies After an Accident?

It depends on the type of accident you have. You may not be able to save money on car insurance if you've had a recent traffic violation or accident since your last renewal.

Switch Car Insurance Today and Save

Steps to Switch Your Car Insurance without a Penalty

In this section, you'll learn an easy process to switch your car insurance without incurring a penalty with your old insurance company.

Determine How Much Auto Insurance Coverage You'll Need

Many states have laws that require a minimum amount of car insurance that their drivers must carry to drive. This insurance is usually liability coverage, which pays for another party's damages in accidents where you're liable. To learn how much insurance you'll need for your vehicle, visit your state's Department of Motor Vehicles.

Consider What You Have to Protect

Unfortunately, the required minimum coverage won't provide enough coverage to protect your assets. Insurance only pays for qualifying damages up to your policy's coverage limits. For example, if you have an auto policy that only covers $20,000 of property damages, you would be responsible for any amounts that exceed this limit, so you may be sued. You would have to pay for the other party's expenses out of pocket. So, consider buying insurance that exceeds your state's minimums.


Have you financed or leased your car? You may need to purchase collision and comprehensive coverage for your vehicle. Although these are optional coverages in most states, your lender or bank may require you to pay for any damages to your automobile if an accident occurs.

Don't Cancel Your Existing Policy Before Getting New Coverage

If you plan to switch car insurance companies, don't cancel your insurance before you find a new policy. Insurers charge higher premiums when a policyholder has a lapse in coverage. If you allow your coverage to expire and you have an accident, your new insurance company may raise your premiums significantly.

Schedule your new policy to take effect on the same day that your old policy terminates to ensure you have continuous coverage. Some insurance companies will reward you with discounts on your policy if you have continuous coverage. Additionally, most insurance companies require that you sign up for your new coverage before the policy term ends.

Research Coverage Options from Different Carriers

You can start shopping for coverage after you've determined how much coverage you'll need.

You can start the process by using SmartFinancial to get free quotes from auto insurance companies. Just enter your zip code to start the process and answer a few quick questions. We'll match you with insurance carriers and coverages within your local area.

To get an accurate auto insurance quote, you'll need to provide:

  • The zip code where you will store your carriers
  • Your car's year, make and model
  • VIN
  • Driver's license or social security number

These steps will allow potential car insurance companies to research your driving history and other demographic information to provide you an accurate quote.

Compare Auto Insurance Quotes

After you've received your auto insurance quotes, take time to compare auto insurance coverage and quotes from different carriers. For instance, a liability-only policy will be cheaper compared to a full coverage policy. When reviewing coverage, compare the limits and deductibles against your current policy, and make sure each insurer offers them for a comparable price.

Look Closely at Policy Liability Limits

Your new policy must offer enough protection that will prevent putting your assets at risk due to an at-fault auto accident. When you compare rates, make sure you're looking at the same liability limits. Consider adding an umbrella policy if you're in a high-income bracket.

Are There Added Benefits?

While searching for a new policy, find out if the insurance company offers perks within your policy free of charge. For instance, some companies will include accident forgiveness, roadside assistance or new car replacement in their policies for no extra price.

Don't Forget Discounts

Ask about discounts. Some car insurance companies already include the discounts into your policy, but you may qualify for others. Contact your local car insurance carrier to ask whether your quote includes discounts. If not, ask about any discounts and how to apply them to your policy.

Review the New Insurance Company's Reputation

Price isn't the only consideration you should make when switching insurance companies. Make sure that insurer that you select is a reputable one.

The number of customer complaints that insurance companies have does matter. Search online to access information about different auto insurers.

These complaints will tell you how the insurance company handles the claims process with their customers. If you switch to an insurer based on only their low rates, it can cost you in the end. If you have an accident, you may have a bad experience if the insurance company makes the claims process difficult.

Resources for Investigating an Insurance Company

The National Association of Insurance Commissioners (NAIC): This organization is the regulatory and standard-setting board for the U.S. insurance industry. Founded in 1871, NAIC is governed by chief insurance regulators in 50 states, the District of Columbia and five U.S. territories. It provides each car insurance company with a score depending on the average number of complaints it receives. Scores above 1.0 indicate an above-average number of complaints from customers. A score below 1.0 means they receive complaints that fall below the industry average.

J.D. Power: This company specializes in data analytics and consumer intelligence of different industries. It also conducts studies on auto insurers regarding customer and claims satisfaction out of an assigned score of 1,000 points.

Contact Your Insurance Company

Next, contact your insurance company before you switch car insurance coverages. Ask your insurance agent if they can match the offer provided by other car insurers. They may be able to search for insurance policies at better rates for you. If not, they may be able to find loyalty discounts that help lower the rates to match their competitors' offers.

Ask about Cancellation Fees, Penalties and Refunds

Some auto insurance companies allow their customers to cancel their policies at any time, while others charge a cancellation fee when you decide to switch car insurance companies.

Ask your carrier if they impose any penalties for switching car insurance companies before your coverage period ends. Additionally, ask about the process to terminate your policy and if you'll need to provide notice before canceling your policy.

Some insurance companies will refund the unused part of your premium, while others will impose a fee if you cancel your coverage midterm. Before you cancel your policy, speak with the customer service department and ask if there are any penalties for switching.

Has your insurer said they will charge a penalty for canceling your insurance before the term ends? It may be better for you to wait until your policy is up for renewal before you switch.

Cancel Your Insurance Policy

Is it impossible for your insurance company to their competitor's rate? Are there zero penalties for switching? You can formally cancel your insurance policy if you decide it's in your best interests.

Some insurers allow you to submit your cancellation request by contacting them over the phone. Others require it to do it in writing. They may also ask you to pay a fee after you cancel your insurance.

Print Out Your New Car Insurance ID Cards

After switching car insurance companies, take a few minutes to print out your new cards from your new insurance company. Most states allow drivers to use digital ID cards instead of printed ones. New Mexico doesn't allow the use of ID cars in place of printed ones. However, it's always good to have some printed copies on hand, just in case you forget to bring your phone with you.

Tell Your Lender or Leasing Company About the Switch

Have you financed or leased your car? Your leaser or loan holder has a financial interest in your automobile.

They may require you to have full auto insurance on your vehicle. These policies include collision and comprehensive coverage. Notify them that you have changed insurance companies, so they can know you're upholding your obligations. You can ask the new insurance company to send proof of your car insurance coverage.

Switching car insurance companies can help you to pay a lower car insurance premium. Using an auto insurance comparison service, like SmartFinancial, can help you to get free auto insurance quotes from different companies. You can compare insurance products from local insurers within your area and select the policy that fits your needs.

Get a Free Auto Insurance Quote Online Now.