Switching car insurance companies can save you hundreds — if not more than a thousand dollars. However, swapping companies takes a little work, so people sometimes forget to shop their policies around renewal time. But amid rising insurance rates, consumers are searching for cheaper policies.
LexisNexis Risk Solutions in February released its Insurance Demand Meter for the fourth quarter of 2022, which revealed auto insurance shopping and policy switching spiked in response to rate increases from U.S. carriers.
Key findings from the report include:
- Overall U.S. auto insurance shopping growth rate rose 2.8% in Q4 2022, up from 1.2% growth in Q3 2022 as auto insurers continue implementing widespread rate increases.
- New policy growth is up 10.2% in Q4 2022 compared to Q4 2021, including record-high volumes in November and December.
“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. “One very notable trend we saw in 2022 was the fact that some lower-risk, experienced drivers who traditionally don’t shop that often are now shopping more and are more likely to switch when they do shop.”
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.
- How much can you save by switching car insurance companies?
- When should you shop for new car insurance?
- Common questions about switching car insurance companies
- Here’s when to switch car insurance
- How to cancel your current car insurance policy
- How much can you save on full coverage?
- Don’t make these mistakes when switching car insurance
- Resources & Methodology
How much can you save by switching car insurance companies?
In April 2023, 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.
Insurance companies have proprietary systems for assessing risk factors and determining premiums. The differences in their systems can result in dramatic premium swings.
Carinsurance.com looked at the rates for a 2019 Honda Accord with full coverage to identify the savings drivers can expect when they switch car insurance companies in all 50 states. Rates were fielded from up to six major insurers for nearly every ZIP code in each state.
The average savings is the dollar difference between the highest and lowest rates received from insurers, on average, for each state’s ZIP codes.
Drivers in some states may save even more by shopping around. We found that Michigan has the highest potential for savings by comparing the highest and lowest rates.
The places where drivers can save money the most by comparing auto insurance quotes are:
- Michigan – $4,837
- Kentucky – $2,805
- Washington, D.C. – $2,731
- Delaware – $2,718
- New Jersey – $2,579
States where drivers save the least still can save about $1,000 annually:
- Alaska – $972
- Nebraska – $974
- Missouri – $1,026
- Utah – $1,077
- Iowa – $1,114
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.
Common questions about switching car insurance companies
Here is what you need to know about switching car insurance companies, including commonly 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 offers 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.
Let your insurer know you are shopping
If it’s just price and not a bad claim or customer service experience that is prompting your switch, let your insurer know you will be shopping your coverage. Some insurers may match your new premium if you already have new quotes.
See how discounts compare among insurers
You may get discounts with a new insurer but lose ones with your old company.
“Your current insurer might give you a loyalty discount for being a longtime customer,” says Justin Herndon, an Allstate spokesman.
Get the details before bundling your home and car insurance
While many companies offer discounts if you switch several policies, such as auto and homeowners insurance, you need to double-check with your new insurer.
“In some cases, a customer might have claims on one type of policy that could hurt the overall price when moved together with another product,” Herndon says.
Your driving record may affect your eligibility for car insurance
Not all companies may be willing to offer you insurance if you have a serious violation, such as a DUI.
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.
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 in 2023
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.
How much can you save on full coverage?
See the average rates from major insurance companies below, according to 2022 CarInsurance.com data.
| Company | Average monthly rate | Average annual rate |
|---|---|---|
| Nationwide | $99.17 | $1,190 |
| USAA | $99.33 | $1,192 |
| Geico | $105.50 | $1,266 |
| Erie | $104.50 | $1,254 |
| State Farm | $119.67 | $1,436 |
| American Family | $113.50 | $1,362 |
| Auto-Owners | $117.17 | $1,406 |
| Travelers | $124 | $1,488 |
| Amica | $111.75 | $1,341 |
| Progressive | $140.50 | $1,686 |
| Farmers | $165.00 | $1,980 |
| Allstate | $173.83 | $2,086 |
| The Hartford | $195.08 | $2,341 |
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,” says Herndon. “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.
— Michelle Megna contributed to this story.
Resources & Methodology
Source
Lexis Nexis. “LexisNexis Insurance Demand Meter Registers as “Nuclear” for New Policy Growth and “Hot” for Shopping in Q4 2022.” Accessed February 2023.
Methodology
The average state rate is composed by averaging premiums for 2019 Honda Accord, male driver age 30, 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 average savings is the dollar difference between the highest and lowest rates received from insurers surveyed, on average, for each state’s ZIP codes. These hypothetical drivers have clean records and good credit. Average rates are for comparative purposes.
