Switching car insurance companies can save you hundreds of dollars a year. However, swapping companies takes a little work, so people sometimes forget to shop their policies around renewal time.
“Consumers often adopt a set-it-and-forget mindset when purchasing car insurance policies, but this is a potentially costly mistake,” says Hugh Allen, principal product strategist at Hi Marley, an intelligent conversational platform for P&C insurance companies. “By re-examining their policies and coverages every few years, or when life transitions occur, consumers can ensure they remain appropriately covered.”
But amid rising insurance rates, consumers are searching for cheaper policies.
LexisNexis Risk Solutions’ Insurance Demand Meter for the second quarter of 2024 revealed that quarterly U.S. auto insurance shopping growth was 16.1% year-over-year.
As consumers increasingly respond to the broad rate hikes imposed by automobile insurers amidst a steadily toughening market, the growth in year-over-year shopping continues to stay robust.
“The shopping activity we’re seeing in the market continues to be extremely volatile as insurers take rate to combat profitability concerns due to rising inflation, loss costs and interest rates,” says Adam Pichon, vice president and general manager of Auto and Home Insurance at LexisNexis Risk Solutions.
It’s an ideal time to look for a new policy, pitfalls to avoid and ways to multiply the savings. Keep reading for the best way to switch car insurance.
- Drivers can typically switch car insurance companies at any time during the policy period
- Switching car insurance companies could help you save hundreds or thousands of dollars per year.
- It can be beneficial to switch carriers after an accident, adding a teen driver, getting married or buying a new car.
How to switch car insurance
The process of switching car insurance is fairly simple, but it requires some work on your end. You’ll need to research new carriers, get new quotes and contact your current insurance company.
Here are the general steps you should follow to switch car insurance companies.
1. Research new insurance companies
The first step to start researching new car insurance companies. When comparing providers, pay attention to factors like financial strength, customer satisfaction, coverage options and online/mobile features. It can also be helpful to read reviews from current and past policyholders to get a better sense of the insurer’s strengths and weaknesses.
2. Consider your coverage needs
When switching car insurance companies, it’s a good idea to reconsider your coverage needs. You might need to change your coverage limits, or purchase different endorsements. For example, if you recently added a teen driver to your policy, you might want to get higher liability limits or add accident forgiveness for more protection in the event of an accident.
3. Ask about discounts
Most car insurance companies offer discounts to help drivers reduce their premiums. You might even earn a discount for switching from a different company. When comparing insurers, look for companies that offer discounts that apply to you. For example, if you drive an electric vehicle or hybrid, look for insurers that offer discounts for eco-friendly cars.
4. Compare quotes
Once you’ve identified a few insurance companies that could be a good fit for your needs, start getting personalized rate quotes. Make sure to get quotes for the same type and amount of coverage, with the same deductibles, for an accurate comparison. Comparing quotes will help you find the best policy at the lowest price for your situation.
5. Purchase a new policy
After you find the best new car insurance policy, you’re ready to purchase coverage. Most national car insurance companies allow you to buy a policy online without talking to an agent. You’ll pay the first month’s premium, or you can pay in full. Most policies go into effect starting at 12:01 a.m on the day after you buy the policy – make sure there is an overlap with your old policy.
6. Cancel your old policy
You can cancel your old car insurance policy once the new policy takes effect. It’s important that your new policy is already in effect before you terminate the old policy. Otherwise, you’ll have a lapse in coverage where you’re not protected by any insurance. Most car insurance companies require customers to call an agent or the customer service department to cancel their coverage.
7. Replace your ID cards
The final step in switching car insurance is to replace your ID cards. Remove your old ID cards from your vehicle and replace them with the new ID cards.
Can you switch insurance at any time?
If you’re thinking about switching car insurance companies, you’re in luck—you can change carriers at any time, even outside the renewal period.
“You can switch car insurance at any time, even if your current policy hasn’t expired (in which case you should get a prorated refund),” says James Brau, Joel C. Peterson Professor of Finance at Brigham Young University. “However, it’s important to review any potential cancellation fees or penalties before making the switch to avoid unnecessary costs. If you switch, be sure you do not have a lapse in coverage between policies.”
Most insurance companies don’t charge an early termination fee and you might be eligible for a refund on unused premiums. However, if you’re earning any customer loyalty discounts through your current insurer, you will lose them when you switch companies.
How many people shop regularly for car insurance?
CarInsurance.com surveyed drivers nationwide about car insurance. The survey found that 49% of drivers shopped for a new car insurer in the past 12 months. Of people who switched insurers, 26% of drivers saved 10% on a new policy, and 29% of people saved 15% on a new insurance policy.
When should you shop for new car insurance?
While a renewal notice may remind you to shop for car insurance, plenty of other life events make exploring other options worthwhile, such as:
- Moving
- Adding or dropping a driver
- Seeing your credit rating change
- Getting a ticket
- Getting into an accident
- Buying a house
- Getting married
- Getting divorced
- Buying a new car
In these cases, you should compare car insurance to assess quotes.
“It’s always a good idea to shop around when you have a major change in your life, such as getting married or when your teens begin to drive,” says Brandt Minnich, vice president of marketing at Mercury Insurance, based in Los Angeles. “Many parents expect to pay a little more when their kids begin driving, but they are often shocked when they see the actual cost.”
Adding a teen to your policy can easily double your premium, so it’s a great time to shop around for a better deal.
Here’s when to switch car insurance
Let’s look into life changes that make shopping your car insurance a good idea.
Switching car insurance at renewal time
Renewal time is an excellent opportunity to shop your insurance coverage. Usually, 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,” says Daniel Shipman with Daniel Shipman Insurance in Texas.
Switching car insurance when you’re moving
If you’re moving to a new address, you need to notify your current insurer of the address change, so you might as well shop your coverage. Let your insurer know if you’re going from an apartment to a house. Homeowners often get better rates because insurers believe they get into fewer accidents and file fewer claims than renters.
Car insurance rates vary drastically by state. The most expensive states are Louisiana, Florida and California. The annual rates for these states are shown below.
Louisiana – $2,883
Florida – $2,694
California – $2,416
Michigan – $2,352
Colorado – $2,337
The cheapest states for car insurance are Maine, New Hampshire and Vermont. The annual rates for these states are shown below.
Maine – $1,175
New Hampshire – $1,265
Vermont – $1,319
Ohio – $1,417
Idaho – $1,428
See how moving affects your auto rates using our “Will my insurance go up if I move?” tool.
Switching car insurance when you add or drop a driver
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.
Switching car insurance when you have a poor credit rating
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.
Switching car insurance after a ticket
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 drive. 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 the 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.
Switching car insurance after an accident
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 usually results in a higher rate regardless of the insurer, shopping for cheap car insurance after an accident can minimize the increase.
Switching car insurance after getting married or divorced
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. You must get your spouse off your joint policy if the life change is a divorce.
Switching car insurance when you buy a new car
A new car can significantly impact your premium. Insurers consider a vehicle’s safety rating, crash and theft statistics and claim rates when setting a premium. So, your new vehicle could be more expensive to insure. Get a few insurance quotes before signing on the dotted line when shopping for a new car.
Switching car insurance when you add a teen driver
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.
Read more about drivers switching car insurance carriers as inflation continues.
How to cancel your current car insurance policy
If you want to cancel your insurance in the middle of your policy period, Minnich suggests obtaining your new coverage. Once it kicks in, immediately contact your current auto insurer to cancel that policy.
You’ll typically need to request the cancellation in writing. Your insurer must report the cancellation to your Department of Motor Vehicles in many states. That means you should have the proper insurance in place beforehand.
Once you cancel, you should automatically receive a refund from your previous insurer if you’ve prepaid and are owed money, Minnich says, but you might be charged an early cancellation fee.
Don’t make these mistakes when switching car insurance
Avoid these mistakes that can make switching insurance companies a financial nightmare.
Leaving a coverage gap
Never leave a coverage gap. You want to ensure your new policy is in place before you cancel your old policy. A coverage gap leaves you unprotected in an accident between policies. In other words, you’ll pay for all repairs and medical bills yourself.
“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,” Herndon says. “An accident can happen at any time, and you don’t want a gap in coverage to exist.”
Not understanding your old policy
Always compare the same coverage levels, deductibles and endorsements 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.
Forgetting your refund
If you’re switching mid-policy, your current insurer may owe you a refund. Most insurers process refunds quickly and easily. Cancel your policy and request a refund. Follow up if your refund isn’t issued promptly.
Swapping insurance cards
Don’t forget to switch out your insurance cards when you change insurers. Most auto insurers make printing your insurance ID cards easy, and many have an app that allows you to keep all your insurance details on your phone.
Forgetting to notify your lender
Contact your lender with the details of your new policy as soon as it goes into effect. If they get a notice from your old insurance company that you have dropped your coverage, they may repossess your vehicle. In other cases, they may “force place” a new policy on your car and bill you for it.
Driving unsafely
In the first 60 to 90 days of an insurance policy, the insurer can drop your coverage with few repercussions. So, drive carefully and avoid any tickets or accidents.
Frequently asked questions
Is it bad to switch auto insurance companies?
No, switching car insurance companies isn’t a negative as long as you find a company that will save you money and offer you sufficient coverage. You also want to ensure switching companies doesn’t cause a lapse in coverage. Going without auto insurance for an extended time could result in you paying higher premiums once you get coverage again.
Does switching car insurance affect credit?
No, switching car insurance companies won’t hurt your credit. Comparing quotes doesn’t trigger a credit check like applying for a credit card.
Those with bad credit usually pay more for car insurance than those with good credit. Insurers view a person’s credit history as a risk indicator.
Will my new insurance company cancel my old insurance?
If you switch insurance companies, your new insurer can’t cancel your old policy on your behalf. You will need to contact your old insurance company and request the cancellation. Sometimes, the policyholder is required to submit the request in writing. You might also need to show your old insurance company proof of your new policy before you will be allowed to cancel.
Can I change car insurance before the renewal date?
Yes, you’re allowed to change car insurance companies before your policy’s renewal date. Typically, you can cancel your policy and switch companies at any time. If you paid your premium upfront, most insurers will also give you a refund on the unused premiums when you cancel your policy.
Resources & Methodology
Source
LexisNexis. “LexisNexis Registers as “Sizzling” for New Policies and “Hot” for U.S. Auto Insurance Shopping.” Accessed December 2024.
Methodology
CarInsurance.com commissioned Quadrant Information Systems to pull rats for a 2023 Honda Accord LX, male and female drivers age 40, with policy limits of 100/300/100 ($100,000 for injury liability for one person, $300,000 for all injuries and $100,000 for property damage in an accident) and a $500 deductible on collision and comprehensive coverage. The data comprises 29,152 cities, 170 companies and 53,409,632 insurance quotes.
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