Shopping your car insurance coverage is never fun, gathering quotes, canceling old policies and signing new ones is not the way most of us like to spend our day, but it can result in major savings.
There are definitely ideal times to look for a new policy as well as pitfalls to avoid and ways to multiply the savings. Here is everything you need to know about switching your car insurance.
When to start shopping for new car insurance
While a renewal notice may jog your memory to shop your car insurance, there are plenty of other life events that make it worthwhile to explore other insurance options. If you move, add or drop a driver, experience a change in your credit rating, get a ticket, have an accident, buy a house, get married or divorced or simply buy a new car, you should consider doing a car insurance comparison 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.
For example, "Many parents expect to pay a little more when their kids begin driving, but they are often shocked when they see the actual cost," he says. 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 are just a few life changes that make shopping your car insurance a good idea:
Renewal: This is a great time to shop your coverage and in most cases your current insurer will send you a reminder. 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.
You are moving: If you are 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. If you’re wondering how your auto rates are affected by moving, you can find out using our “Will my insurance go up if I move?” tool to find out.
If your new digs come with a high crime or claim rate you can expect your premiums to be headed up. On the other hand, if you are moving out of the city to a suburb or the country you should see your rates drop. “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 are going from an apartment to a house, let your insurer know. Homeowners tend to be involved in fewer accidents and file fewer claims than renters which often results in a lower rate. In addition, consider placing your homeowners insurance with the same insurance company to receive a bundling discount that can range up to 25 percent.
Adding or dropping a driver: Changes in your driver lineup will usually result in a rate change so this makes 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 expect 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.
Credit rating change: Insurers love statistics and their data shows that drivers with a poor credit tend to file more claims than drivers with good credit.
“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 percent more, on average, than those with good credit for car insurance. But 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.
You got a ticket: If you’re convicted of a moving traffic violation, your rates will be headed up in almost all cases. For example, CarInsurance.com’s data analysis shows that a speeding ticket increases rates by an average of 22 to 30 percent, depending on how fast you’re driving. Failure to stop, tailgating, illegal turns or passing ding your rates by about 20 percent annually. While you will most likely be paying a higher premium regardless of which insurer you choose, 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 data research.
This is especially true for infractions beyond speeding or running a red light. A DUI, reckless driving or even 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.
You cause an accident: If you are in an accident and make a claim on your insurance, your rates are definitely headed up, unless you have accident forgiveness on your policy. An accident will increase your rate by an average of 32 percent, 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 help minimize the increase. CarInsurance.com data show that drivers with a recent accident can save about $1,100 by doing a car insurance quote comparison, as that was the difference between the highest and lowest rate fielded from six major insurers.
Married or divorced: You should notify your insurer if there is a change in your marital status which makes this a great time to shop your rates. Statistics show that married drivers are safer out on the road so if you are tying the know expect a slight dip in your premium.
If the big life change is a divorce, you will need to shop your insurance as you need to get your spouse off of your joint policy. Your rates could go up or down depending on a number of 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.
Buying a new car: This should be a given. You have to insure your new car so you might has well take some time to shop all of your policies. A new car can have a major impact on your premium, especially if you are going from a mini-van to Ferrari. Insurers consider a vehicles 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 jump) when it’s time to insurer your new car.
Adding a teen driver: Your rate will increase, on average, by about 140 percent 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.
Shopping your insurance? Keep these things in mind
If you have decided to shop your insurance, you probably have a few questions about the process and what pitfalls you should try to avoid. Here is what you need to know about switching insurers:
Can I change car insurance companies mid-policy with my current provider?
Yes, it is possible to change car insurance companies even if you are mid-policy. Typically, all you need to do to cancel your car insurance policy is submit a signed cancellation request form. In some cases, it is as easy as emailing your agent that you wish to cancel your policies and the date you want the cancellation to take effect. You may need to show proof of a new car insurance policy with another company for your cancellation to go through.
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 are going to be shopping your coverage. Many insurers will work to keep your business and may pull out some new discounts to help lower your premium. If you already have new quotes, some insurers may match your new premium.
Not all insurers are willing to do this and some may simply wish you the best. If you decide to move your insurance, in most cases it is best to move all of it if you can in order to take advantage of bundling discounts which can be significant.
Consider how discounts compare among insurers
You might be gaining discounts with a new insurer and losing ones you had with your old company.
“Your current insurer might give you a loyalty discount for being a longtime customer,” says. Justin Herndon, an Allstate Insurance Co. spokesman.
"Consumers should keep in mind that they may lose such perks as accident forgiveness or vanishing deductible when they switch insurers, but in return may obtain lower rates and other perks," Gusner says.
While your new company may offer accident forgiveness and vanishing deductible, you might have to be a customer for several years to be eligible. But the savings you see from switching insurers "could possibly more than cover any surcharge you may receive if you are in an accident without having accident forgiveness," she says.
Get the details before bundling your home and car insurance
While many companies will offer discounts if you switch several types of policies, such as your auto insurance 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. On the other hand, "That difference could also be helped with a move to another company," he says.
The best advice is to run the numbers with bundling and without to see which way results in a lower premium.
Your driving record may affect your eligibility for car insurance
Your driving record might not be squeaky clean, but in most cases that shouldn't prevent you from changing auto insurers.
"Your ability to switch insurance companies most likely won't be impeded by infractions you may have on your record," Minnich says, but if you have a serious violation, such as a DUI, not all companies may be willing to offer you insurance.
How to cancel your current car insurance policy
If you decide you want to cancel your insurance in the middle of your policy period, Minnich suggests obtaining your new coverage, and then once it kicks in, immediately contacting your current auto insurer to cancel that policy.
You'll typically need to request the cancellation in writing, and in many states, your insurer is required to report the cancellation to your state department of motor vehicles. 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.
Always investigate new insurers
Before switching insurers make sure you thoroughly check out any new insurance company you are considering. The majority of state insurance offices keep track of customer complaints so check with your state office before switching.
Read online reviews, such as our 2019 Best Car Insurance Companies customer satisfaction rankings, and check their financial strength with A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody’s or Standard & Poor’s. If you see the same issue come up over and over in reviews (poor claim or customer service) you may want to keep shopping.
It is never a good idea to choose an insurance company solely on price, always check reviews. An insurance policy is not a bargain if you struggle to get a claim paid or get someone on the phone after an accident.
Common mistakes to avoid when switching car insurance companies
Avoid these mistakes which can make switching insurance companies a financial nightmare:
Leaving a coverage gap: 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 are in an accident between policies, in other words you will be paying for all repairs and medical bills yourself.
In addition, if you have a long-term gap in coverage you will be paying more for a policy in the future. Insurers hate gaps in coverage and it is just one of many factors they consider when setting a premium so make sure you have a new policy in place before cancelling your current coverage. Also, a lapse in coverage means you’ll wind up paying nine to 13 percent more, on average, when you get your your new policy, according to CarInsurance.com’s rate analysis.
If you wait till 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."
Not cancelling your old policy: This happens more often than you would imagine and can have serious repercussions. You should notify your current insurer, in writing that you are cancelling your policy. If you simply stop making payments or just let your policy lapse, your insurer may not realize you are canceling and treat it like a delinquent account which 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 have cancelled your policy properly and receive a confirmation of cancellation.
Missing the details of a new policy: It is 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 are comparing exact 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, this will ensure they match your current coverages.
Forgetting your refund: If you are 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 there have been cases where drivers have had difficulty getting their refund. Always cancel your policy as soon as the new one takes affect and request a refund, follow up quickly if the refund is not issued in a timely manner.
Switch out your cards as well: 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 is not a great way to spend the morning.
Most 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.
Don’t forget to notify your lender or leasing company: 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, and 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.
Take it easy: 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 is best to drive extra careful and avoid any tickets or accidents in this time frame.
How much you can save by switching car insurance companies
There can be many benefits to switching insurers but one of the major ones is saving money. Insurance companies all have proprietary systems for assessing risk factors and determining premiums. The differences in their systems can result in dramatic premium swings.
Your job is to find the insurance company that likes your risk factors the best. Switching to a different insurer can result in major price differences as Carinsurance.com discovered.
Carinsurance.com looked at the rates for a for a 2016 Honda Accord with full coverage to identify the savings drivers can expect when switching insurers 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.
CarInsurance.com’s rate analysis found the following potential savings, or the difference between the highest and lowest price, for the same policy:
- State minimum liability – average savings of 153 percent, or $497
- Full coverage – average savings of 138 percent, or $1,127
When broken down by state, savings are even more significant in some cases. For full coverage, drivers in states with the highest average savings can trim $2,000 to $3,000 from their premium just by comparing rates and opting for the lowest one. But even in states where the savings are much lower, you can still avoid overpaying by $350 to $600 -- a 40 percent to 70 percent savings.
|State||Average annual rate||Average highest rate||Average lowest rate||Average % savings||Average $ savings|
If you’re wondering which car insurance companies are the cheapest near you, CarInsurance.com’s rate data can help. Here we show average car insurance rates from major insurers, ranked from least to most expensive, for every state, for a full coverage policy.
Switching car insurance companies? Car insurance company rate comparison in every state
|State||Company||Average annual rate|
|Florida||21st Century Centennial||$1,972|
|Iowa||Amco Ins Co||$645|
|Idaho||Depositors Ins Co||$863|
|Illinois||Amco Ins Co||$678|
|Mississippi||Progressive Gulf Ins Co||$1,268|
|North Carolina||State Farm||$845|
|North Dakota||State Farm||$1,132|
|North Dakota||Mid Century||$2,560|
|New Hampshire||State Farm||$1,036|
|New Jersey||21st Century Centennial||$762|
|New Jersey||Allstate NJ||$1,761|
|New Jersey||State Farm||$1,847|
|New Mexico||State Farm||$1,177|
|New York||State Farm||$1,855|
|Rhode Island||State Farm||$1,132|
|South Carolina||State Farm||$1,511|
|South Dakota||Mid Century||$982|
|South Dakota||State Farm||$1,052|
|West Virginia||State Farm||$1,309|
How to increase your car insurance savings
Here are a few ways to increase the savings even more when switching insurers:
Ask about other car insurance discounts when you change insurers: 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.
Change your deductible: 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.
Change your coverage: This is another great way to lower your premium, especially if your car is getting older. If you are driving an older vehicle you may be able to drop collision and comprehensivewhich will absolutely lower your premium. If you would replace a vehicle instead of having it repaired after an accident, it’s time to drop these coverages.