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Changing Insurance Companies: How and When to Switch

November 25, 2011

Thinking about switching insurance companies? One of the top reasons why you may choose to switch car insurance companies is because you found a cheaper car insurance quote with another insurance provider and switching will save you money. Here are a few easy steps to follow and things you should know when making the switch.

Choosing a New Insurance Company

The first step to changing insurance companies is to select a new company and policy. Start by obtaining quotes from a variety of companies. When you request quotes, make sure that you are getting the quote based on the same coverage options and levels; this will ensure that you are comparing rates fairly. InsuranceHotline.com will compare car insurance quotes against over 30 insurance companies and save you the hassle of calling around to various insurance providers.

While looking for a cheaper rate, also be sure to look into the company’s reputation for customer service and claims handling. A great rate combined with great service is what you should be seeking!

Cancelling the Old Policy

When cancelling your old insurance policy, it is best to do so in writing even if your insurance company doesn’t require it. This ensures that you have record of the date of the requested cancellation so that there is no confusion as to when you want the old policy to terminate.

Before you cancel, be certain that the new insurance policy is in place. The last thing you want is to cancel your old policy and then find out that either the new policy is not active yet or that the rate that you were quoted is not the premium you are receiving. This would leave you scrambling to either find a new policy or stuck with a higher rate than you expected.

Your old policy can sometimes be cancelled retroactively, if you started a new policy but did not cancel the old one right away. You will need to ask your insurance company what their policy is on retroactive cancellations. In most cases, you will need to provide a copy of the proof of insurance on the new policy showing the in-force date.

Prorating, Short-Rating and Avoiding Penalties

When you cancel your policy mid-term, your insurance company may either prorate or short-rate the refund that you receive. In a prorated situation, you will be refunded the total amount of the premium for the coverage you did not use. This means that if you had a twelve month policy but cancelled after nine months, you would receive three months worth of premium refunded to you.

In some cases the car insurance company may refund based on what is known as a short-rate. This is when the insurance company would take a penalty out of your refund for early cancellation. It’s best to find out which system your insurance company will use prior to cancelling.

In some cases, the savings you are able to secure on your new policy may outweigh this penalty. If not, consider making the switch to your new policy on your renewal date instead of mid-term. When you switch on renewal, notify your insurance company that you will not be renewing – as not communicating your cancellation request can leave you exposed to a non-payment policy cancellation on your record. Plus, there will be no mid-term refunds to deal with. Take the time to figure out which of these options will save you the most money; if the new rate is really that much better, it’s time to make the switch.

Other Considerations When Cancelling

When you cancel your old policy and move to a new company, bear in-mind that you will not be able to take accident forgiveness with you. Make sure that the new company has given you a quote based on everything that is on your driving record. Accident forgiveness generally does not transfer from one company to the next.

When you change companies you will also lose any longevity discounts and multi-policy discounts. Consider the impact on the rates for other policies you might have; will your homeowner’s insurance go up if it is insured with the same company? This may impact just how good the deal at the new company really is. Consider moving all of your existing policies to the new company; you might save even more.

It is your right to change auto insurance companies whenever you like, but bear in-mind that insurance companies do have the right to charge penalties for early cancellation depending on the circumstances. By ensuring you are aware of the full impact of cancelling before you make the change you can avoid any surprises and make the transition smooth.

  • Moe Farnoush

    It is a very useful analogy and I believe the Insurance Hotline is doing a great job to help you eliminate the abuser car insurance companies!!!!

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  • http://www.insurancehotline.com/ InsuranceHotline.com


    In Ontario insurance rates are regulated and must be filed to the governing body. So they can’t offer you any rate they like they have to offer the rate that they had been approved for.

  • Kelly Martens

    Am I obliged to provide my current homeowner’s insurance policy number when applying for coverage from another company?

  • Vidhushi Jain

    If switching from one company to another company for car insurance.. Will the earlier company give claim on insurance if it is about to expire?

  • Eddie

    My insurance rate increased almost 50% after i had a bumper bender accident , but i have the first accident forgiveness . So i called them and asked why, the answer its usual and its happening to alot of people, then i asked my neighbours and friends but not a single person approved their claims.
    So i am moving to another company even though ill be paying more due to my accident
    is it a smart idea? How much an at fault accident increase the rates usually?

  • http://www.insurancehotline.com/ InsuranceHotline.com

    make sure that you get quotes that include your accident before you make the decision to move to another company.

  • Jay

    My insurance policy was terminated. I have found a cheaper rate than what my broker can give me. Is there usually a charge to switch brokers ?

  • InsuranceHotline

    Not if your current policy has expired. The only time it may “cost’ you anything is when you change companies in the middle of the policy term.
    In some cases that makes sense if you are saving more with a new policy than you are paying in a cancellation fee with your existing company.

  • Shree

    Can I cancel my insurance with one insurance company saying I will not be using it and get a quote from another insurance company and keep using the vehicle? What are the risks.

  • Laura

    I have only just had received my renewal documents and my renewal date is tomorrow, I want to get quotes elsewhere, can i request an extension?

  • InsuranceHotline

    I don’t know where you are but I know in the Province of Ontario you should receive your renewal 30 days prior to the expiry date. You can contact your broker or the company to see what your options are.

  • Marius Hervé Edja

    My insurance policy was terminated because I did not pay on the due date the monthly premium. Will that affect my rate with a new company?

  • InsuranceHotline

    It is possible that you may have to pay an increased rate as you will have a cancellation for non-payment on your account.

  • jonathan

    Question. Hope I don’t make this too complicated. Here goes! I just went from one insurance company to the other, moving car and motorcycle. When I cancelled with one company, they wanted a letter requesting cancellation and effective date of cancellation, not a problem which I provided. Now, in terms of effective date of cancellation, I accidentally gave the wrong effective date of cancellation – March 7, 2016 and wrote that in my letter. I realized after I sent in the letter it was the date of the motorcycle and not the car. I called my new insurance company and had the car start a day earlier, because I give the old company the wrong cancellation/effective date of my new insurance. Now the question is, will the old company ask for an effective date of the new one? I’m thinking I should call my old company and let them know of my mistake. Or should I just leave it, as the new policy has already taken effect? Thanks for the answer!

  • Shanell Johnson

    I just purchased a 2014 kia and the insurance is with progressive, but I shopped around and for the same coverage allstate is $40 cheaper. my new policy started 4-18-2016. will I be charged a penalty to cancel?

  • InsuranceHotline

    If you cancel a policy at any point in the term you may be charged a penalty. Each insurance company has their own rules so you should double check with yours.

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