How To Switch Car Insurance Without Penalty Fees in 7 Steps
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If you’re not careful, switching car insurance companies may result in unexpected cancellation fees or lapses in coverage, which will likely increase your car insurance rates for a while. Losing discounts from your current insurer after switching can lead to higher overall insurance costs without you realizing it, as well.
Below, we outline the steps for how to switch car insurance without fees — from checking your current policy for cancellation charges to shopping around and scheduling your new policy’s start date.
How To Switch Car Insurance in Seven Steps
Switching car insurance without incurring penalties is simple when you follow these seven steps.
Step 1: Review Your Current Insurer’s Cancellation Policy
Getting clear on your cancellation policy will help you determine whether you should cancel your current policy before the term ends or wait until the term expires. For example, if the cancellation fee for ending your policy early is higher than the savings from switching, then you may want to stick with your current policy for its full term.
When researching your policy about early cancellation, find answers to the following questions:
- What is the exact date your policy will end?
- Will you incur a cancellation fee if you end your auto policy early?
- Will your current insurer issue a prorated refund if you switch car insurance companies mid-policy?
If you’re unable to find answers to the above questions, call your insurance company and ask your insurance agent to explain the consequences (if any) of canceling your policy early.
Step 2: Compare Rates From Multiple Insurers
Shopping around can help you find a better deal than what your current insurer is offering. You may be surprised how much you’re overpaying on car insurance after seeing insurance rates in the current market.
To get the most accurate quotes when shopping around, make sure you have the following information:
- Zip code
- Number of vehicles you want to insure
- Number of drivers you want to insure (e.g., spouses/partners, children, other household members)
- Number of tickets and prior accidents
- Weekly/annual car mileage
- Vehicle Identification Number (typically found on the interior dash or driver-side door jamb)
- Age and sex
- Driver’s license number
- Marital status
- Credit scores (Optional for some auto insurance companies. These are typically soft pulls on your credit report, so they should not harm your credit score)
When comparing quotes, make sure you’re comparing apples and apples. A quote for full coverage from one company rated against a quote for minimum coverage from a different company would not be a fair comparison.
If you’re switching companies because you’re unsatisfied with your current insurer’s customer service, remember to research customer reviews and how the company is rated on dependability and service. Third-party raters that evaluate companies based on overall customer satisfaction, like J.D. Power, can help narrow down your options.
Save time and money by using an insurance marketplace like SmartFinancial. Compare quotes from multiple insurers in your area so you don’t need to contact them individually. Just complete one online questionnaire about your insurance needs and we’ll match you with a policy with your desired coverage at a cheaper price.
Step 3: Ask About Discounts
After narrowing down your top options, ask each insurance company about their available insurance discounts to maximize your savings. Examples of discounts you may qualify for include:
- Multi-policy discount: Purchase more than one insurance policy from the same carrier, such as home and auto insurance.
- Multi-car discount: Add more than one vehicle to a single auto policy.
- Vehicle safety/anti-theft discounts: Your vehicle is equipped with safety devices, such as anti-lock brakes, airbags and daytime running lights.
- New car discount: Your vehicle is a certain age or newer.
- Good driver discount: Maintain a driving record free from accidents, tickets and claims for a certain time period.
- Defensive driver discount: Take a refresher course on safe driving techniques.
- Good student discount: Maintain a certain school GPA.
- Pay-in-full discount: Pay your entire policy in one upfront premium versus monthly payments.
- Early bird/renewal discount: Buy or renew your policy before its term expiration date.
- Affinity discount: Be a member of a certain club, group or profession (e.g., military, teacher).
Step 4: Purchase Your New Policy
When purchasing your policy, you will be asked when your coverage will begin. You should schedule your new policy to start either on or before your current policy’s end date. Scheduling it after your current policy’s end date — even for one day — will create a lapse in coverage, which typically leads to higher insurance premiums.
Step 5: Cancel Your Existing Insurance Policy
After purchasing your new policy, remember to cancel your old insurance policy. Otherwise, you may be re-billed if you signed up for auto-renewal. Depending on the insurer, you may cancel your policy online or by phone. Be sure to save a copy of your policy termination.
Never cancel your current policy until after you purchase the new policy or you will create a lapse in coverage.
If you’re entitled to a prorated refund because you canceled your current policy mid-term, ask your insurance company how the refund will work. You may get a refund via the card on file or receive a check by mail.
Step 6: Print Your New Car Insurance ID Cards
Maintaining car insurance is required in most states and your proof of car insurance card proves you have coverage. After buying your new policy, the new insurer should mail you a physical proof of insurance card. Proof of insurance may also be available online or by mobile app depending on the car insurance company.
Be sure to store your proof of insurance card in a readily accessible area — we recommend your glove compartment. If you’re unable to show proof of insurance when an officer pulls you over, you may be slapped with fines and penalties.
Step 7: Notify Your Lender
When financing your car, your lender will likely require you to carry full coverage. You should always notify your lender that you intend to switch car insurance carriers and again after you purchase the new policy.
If you switch carriers without notifying your lender, they may mistakenly believe you’re not maintaining car insurance. Your lender may purchase another car insurance policy on your behalf, which may cost more than what you’re currently paying for coverage.
Why Would You Switch Car Insurance Companies?
Shopping around can help you find a more affordable auto policy that matches your needs. Beyond saving money, certain life changes can reveal it’s time to switch car insurance companies. Below are some reasons why you might switch carriers:
- Your insurer increased your rates: Car insurance rates can increase for several reasons, including getting into a car accident or your credit score taking a nosedive. A different insurer may offer you better coverage at your old rate or even cheaper.
- Your credit score changed significantly: If your credit has improved, you may be able to get the same coverage at lower rates from another car insurance company. Even if your credit worsens, your current insurer may increase your rates and another insurance company may offer a lower premium.
- 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 from your policy: Generally, adding drivers or vehicles to your car insurance policy will increase your premium and removing them will lower it. You can switch car insurance companies if you need to find more affordable rates.
- You added or removed a vehicle from your policy: Adding or removing a vehicle from your policy will directly affect your car insurance premium. Another company may offer cheaper rates than your current insurer.
- You purchased your first house: Several car insurance companies offer discounts just for being a homeowner. Your savings may increase if they offer a discount when you bundle home and auto insurance, too.
- You moved to a different city: Your zip code will affect your premiums since repair costs, crime rates and other rating factors will vary by location. If you move to a new state, you will likely need to buy a new policy if your current company doesn’t insure that area.
- Your current insurer has poor customer service: If you’re unsatisfied with how your current insurer handled your car insurance claim, you may find a superior experience from a different company.
- You got into a car accident: Expect your car insurance premium to rise after you report a car accident to your insurance carrier. Shopping around can help you find a better rate.
When Is the Best Time To Switch Car Insurance?
Shopping for car insurance and switching carriers even six to 12 months is generally a good idea. Car insurance policies typically carry six- or 12-month terms, so this creates a natural timestamp for when it’s time to switch. Insurance rates are constantly shifting based on your risk factors and market factors, like inflation and repair costs. Shopping around regularly can help you maintain your desired coverage at the cheapest price at that time.
You may also want to shop around when you experience certain life events. For example, moving into a low-crime neighborhood may lower your premium if you’re maintaining comprehensive coverage. Or, you may want to consider a pay-per-mile policy if you switched to a work-from-home job position.
Below are some life events that can signal it’s time for a car insurance company change:
- You got married and want to add your spouse and children to your auto insurance policy.
- Your child permit driver is officially getting licensed and you want to add them to your auto policy.
- Your child is moving out and is purchasing their own auto policy.
- You’re moving homes.
- You’ve recently become a low-mileage driver (e.g., you retired, switched to a remote working job).
- A family member is joining the military (another carrier may offer a military discount or you want to switch to USAA, which offers unique military benefits).
Regardless of the reason(s) you switch car insurance companies, you should schedule your new policy to start on or before the end date of your current auto policy. This ensures you will not create a lapse in car insurance coverage, which will cost you money when it’s time to renew.
When To Avoid Switching Car Insurance Companies
Switching car insurance companies is generally a good idea if it saves you money. However, there are some cases where it’s probably best to wait for your current policy to expire before you switch.
Cancellation Fees Cancel Out Your Savings
We always recommend you confirm if your current insurer charges fees for canceling your policy early because this will directly affect how much you will save when switching to a new carrier. If you do not do the math beforehand, you may be paying more overall by switching instead of waiting for your current policy to expire.
For example, say your current insurer is charging a $70 early cancellation fee. Your current policy expires in two months and you found a new carrier charging $20 less per month than your current insurer. If you switch, you’ll save $40 over the next two months but it would cost $70 to cancel your current policy. Scheduling your new policy to start when your current policy ends would be more cost-effective.
Don’t Switch if You Got Into a Car Accident (At Least Not Immediately)
If you filed a car insurance claim because you got into a car accident, your insurer will likely apply a premium surcharge to your policy. However, this surcharge may not apply until you renew your policy.
When shopping around, other insurers will factor your recent car accident into your auto insurance quote too. Unless you’re offered a lower rate than your current premium despite your car accident, you’re better off riding out your current policy until it expires. Otherwise, you may pay elevated rates earlier than you have to.
You Lose Discounts and Increase your Overall Costs
Always understand how your current discounts will affect your costs overall. You may not realize that you may be paying more after switching to a new company because you’re losing savings, like bundling discounts or loyalty discounts.
Example: Say you purchase home and auto insurance and save 20% for bundling. After applying the discount, home insurance costs $1,000 annually and car insurance costs $1,000 annually. After shopping around, you find a new carrier offering $950 per year. However, your auto insurance increases to $1,250 per year. You may be saving $50 on car insurance but you’re still paying $200 more overall after losing your bundling discount from your current auto insurer.
SmartFinancial makes shopping around easier. After confirming your current insurer’s cancellation policy, use our free online tool to find the coverage you need at the cheapest price. All you need is to complete one quick online questionnaire and we analyze multiple carriers in your area to match you with the best policy. Just enter your zip code below or call 855.214.2291 to receive your free car insurance quotes.