Switching car insurance: How to do it the right way?

Renewal time is a great opportunity to shop your insurance coverage. In most cases, your current insurer will send you a reminder at renewal time.

If your rates are headed up at renewal time, you can find the best cheap car insurance for your situation by comparing quotes.

“Insurance companies use different algorithms to rate policies. One company may provide a better rate for a teenage driver than another, while another company rates elderly people better,” explains Daniel Shipman with Daniel Shipman Insurance in Texas.

If you’re moving to a new address, you need to notify your current insurer of the address change anyway, so you might as well shop your coverage.

"Every insurance policy takes into account your Zip Code and the likelihood that people living in that Zip Code will make a claim, so shopping around after you move is a great idea,” advises Seth Miller, director of sales at InsuraMatch.

You can find out more about how moving may affect your auto rates by using our “Will my insurance go up if I move?” tool.

If your new digs come with a high crime or claim rate, you can expect to pay higher auto insurance rates. On the other hand, a low-crime area may result in lower rates for you.

“One insurance company may have better rates in your new area than another, even if you only moved a few miles from your last residence,” says Miller.

If you’re going from an apartment to a house, let your insurer know. Homeowners often get better rates because insurers believe they get into fewer accidents and file fewer claims than renters.

In addition, consider placing your homeowners insurance with the same insurance company to receive a bundling discount that can range up to 25%.

Changes in your driver lineup will usually result in a rate change, making it an ideal time to shop your policy. If the new driver is a teen, expect your rates to skyrocket, especially for a male driver.

On the other hand, if a young adult is moving off your policy, you’ll likely see a significant drop in rates.

Anytime someone moves into or out of your household and has access to your cars, you should notify your insurers because it could impact your rates.

Insurance companies usually charge drivers with poor credit higher premiums, except in the states where that practice is forbidden.

“The majority of insurance carriers consider credit scores and all but three states allow for credit-based rating. Credit scores are typically weighted very heavily in insurance rates.

If you've been tracking your score over time and have seen an improvement since the last time you compared quotes, it's a great time to shop,” says R.J. Weiss, certified financial planner.

CarInsurance.com’s rate analysis shows that drivers with bad credit pay 71% more, on average, than those with good credit for auto insurance.

By comparing car insurance companies, drivers with bad credit can save $2,000, or $167 a month, on their yearly policy cost by comparing rates, according to data used to rank the worst states for drivers with bad credit.

Your car insurance rates will likely increase if you’re convicted of a moving traffic violation.

CarInsurance.com’s analysis shows that a speeding ticket increases rates by an average of 22 to 30%, depending on how fast you’re driving. Failure to stop, tailgating, illegal turns or passing ding your rates by about 20% annually.

While you’ll likely pay a higher premium regardless of insurer after a ticket, insurance companies rate risk differently, so this is an excellent time to shop for new coverage. For example, you can save about $800 by comparing rates after a recent speeding ticket, according to CarInsurance.com’s research.

This is especially true for infractions beyond speeding or running a red light. A DUI, reckless driving or driving without a valid license can dramatically increase your insurance premium or even result in an outright cancellation. You may need to find a specialized insurance company to secure coverage after this type of ticket.

If you’re in an accident and make an insurance claim, your rates will increase unless your policy has accident forgiveness.

An accident will increase your rate by an average of 32%, or by about $450.

While a recent accident will usually result in a higher rate regardless of the insurer, shopping for cheap car insurance after an accident can minimize the increase.

CarInsurance.com data show that drivers with a recent accident can save about $1,100 by doing a auto insurance quote comparison, as that was the difference between the highest and lowest rate fielded from six major insurers.

You should notify your insurer if there’s a change in your marital status. Statistics show that married drivers are safer on the road, so if you’re tying the knot, expect a slight premium dip.

If the big life change is a divorce, you’ll need to shop your insurance as you need to get your spouse off your joint policy. Your rates could go up or down depending on many factors.

If your ex-spouse was a lousy driver with numerous tickets, you should have a much lower rate on your own. On the other hand, if your driving record is less than perfect, you could see an increase coming your way.

You have to insure your new car, so you might as well take some time to shop all of your policies.

A new car can have a significant impact on your premium, especially if you’re going from a mini-van to a Ferrari. Insurers consider a vehicle’s safety rating, crash and theft statistics, as well as claim rates, when setting a premium. So, your new vehicle could end up being much more expensive to insure.

When shopping for a new car, always get a few insurance quotes before signing on the dotted line. You don’t want a big surprise (think huge insurance rate jump) when it’s time to insure your new car.

Your rate will increase, on average, by about 140% when you add a driver age 16 to your policy, according to CarInsurance.com’s rate analysis.

But some insurance companies are more forgiving than others, so you can still garner some savings. Adding a teen to your policy is a perfect time to get quotes from multiple companies.

Never leave a coverage gap. You want to make sure your new policy is in place before you cancel your old policy.

A coverage gap leaves you unprotected if you’re in an accident between policies. In other words, you’ll pay for all repairs and medical bills yourself.

In addition, if you have a long-term gap in coverage, insurance companies will charge you more later. Insurers hate gaps in coverage. A lapse in coverage means you’ll wind up paying 9 to 13% more, on average, when you get your new policy, according to CarInsurance.com’s rate analysis.

If you wait until the end of your policy term to switch, you'll want to have your new policy start on the same day your current policy expires.

"Many policies start at 12:01 a.m., so be sure you have coverage on any previous policy all the way until the new policy takes effect," says Herndon. "An accident can happen at any time, and you don't want a gap in coverage to exist."

This happens more often than you would imagine and can have serious repercussions. You should notify your current insurer in writing that you are canceling your policy.

If you simply stop making payments or let your policy lapse, your insurer may not realize you’re canceling and treat it like a delinquent account. That can result in you being sent to a collection agency and your credit rating being dinged.

Most insurers require cancellation in writing, so make sure you cancel your policy properly and receive a confirmation of cancellation.

It’s always easy to find a cheaper policy if it comes with less coverage or a higher deductible.

A super affordable quote may look great until you dig into the details. Always make sure you’re comparing the same coverage levels, deductibles and even features, such as accident forgiveness, when shopping for a new policy.

The best way to shop is to send your current declarations page to any insurer you are getting a quote from, which will ensure they match your current coverages.

If you’re switching mid-policy, your current insurer may owe you a refund if you paid upfront. As an example, if you paid for a six-month policy and then decide to switch insurers after three months, your insurance company owes you a refund for three months of premiums, minus a cancellation fee if it applies.

Most insurers process refunds quickly and easily, but drivers sometimes have difficulty getting their refund. Always cancel your policy as soon as the new one takes effect and request a refund. Follow up quickly if the refund isn’t issued promptly.

It’s pretty easy to forget to switch out your insurance cards when you change insurers, but if you get pulled over without proof of current insurance, you could be looking at a fine. While you can most likely get the ticket dismissed if you go to court with your new cards, spending the day in traffic court isn’t a great way to spend the morning.

Most auto insurers make it easy to print your insurance ID cards and many have an app that allows you to keep all of your insurance details right on your phone.

If you have a loan or lease on your vehicle, you need to notify them as soon as you switch insurers.

Your lender will require that you carry insurance on your vehicle. If they get a notice from your old insurance company that you have dropped your coverage, they may start the process of repossessing your vehicle. In other cases, they may “force place” a new policy on your vehicle and bill you for it.

Contact your lender with the details of your new policy as soon as it goes into effect.

In the first 60 to 90 days of an insurance policy, the insurer has the right to drop your coverage with very few repercussions.

So, it’s best to drive extra careful and avoid any tickets or accidents in this time frame.

Check with your new insurer to see what other car insurance discounts you might be eligible to receive.

If you're transferring more than one vehicle to a new insurance company, you could get a multi-car discount or you might get a discount for insuring your home and auto with the new company.

There also may be discounts for signing up for automatic payments or paying your premium in full.

Raising your car insurance deductible to lower your rates is one way to trim costs, and a good time to make this change is when you switch policies.

If you can double your deductible, expect to see some big savings but always choose a deductible you can easily afford in the event you have to make a claim.

This is another great way to lower your premium, especially if your car is getting older. If you’re driving an older vehicle, you may be able to drop collision and comprehensive, which will lower your premium.

If you would replace a vehicle instead of having it repaired after an accident, it’s time to drop these coverages.

Switching car insurance takes time and getting quotes from multiple car insurers isn’t the funnest activity. However, by doing a little bit of work, you can save more than $1,000 each year on car insurance, which you can put toward your mortgage, a vacation or a new car.