Changing Insurance Companies: How and When to Switch

By InsuranceHotline.com Team
Couple with computer

Deciding to change insurance companies? Have you bought your first car and are looking to move away from mom or dad’s insurance? Perhaps your insurance company just doesn’t compare to your friend’s or coworker’s. Maybe you’ve found a cheaper car insurance quote with another provider and switching will save you money. Here are a few things to consider before making the transition and steps to take if you do.

Choosing a New Insurance Company

When choosing a new insurance provider there are a few steps you should take.

Step One

Review your existing policy to see what coverage you currently have. What is your deductible? Do you have accident forgiveness? What level of coverage do you have? Make a list of all the features you want in your new insurance policy before contacting an insurance provider. This way you can confirm the insurer is offering you a rate that is lower without compromising your existing coverage.

Step Two

Start by obtaining quotes from a variety of companies. Just because one company is offering you a lower rate does not mean it is the lowest rate. Make sure to plug in the details you collected on your current coverage and see what is being offered. InsuranceHotline.com will compare car insurance quotes from over 30 insurance companies so you don’t have to.

Tip: When dealing with any company, insurance or not, check the online reviews to see what kind of reputation the customer service has. A great rate and great service is ultimately what you are looking for. Be mindful, a star rating doesn’t mean everything. Read customer reviews. Most people dealing with an insurance claim are already stressed out. Make sure the comments focus more on the company itself, rather than the commenters’ accident.

Cancelling the Old Policy

Before starting the process of cancelling your old coverage, make sure the new policy is in place. You’ll want to make sure the rate you were quoted is the premium you’ll be receiving. If you forgot to mention an old accident or a secondary driver in the initial quoting process, you may find yourself with a higher rate. Next, find out the date your policy will become active and notify your old insurance provider.

When cancelling an insurance policy, it is recommended to do so in writing, even if your insurer doesn’t require it. This way you have a record of the requested termination date, and you can avoid confusion around when you want your coverage to end. You’ll want to line up your new policy to start on or before the end of your old coverage.

Check with your insurance provider to see if they have a format they require and remember to sign your cancellation letter before sending it back.

If you decide to start your new policy right away without notifying your old provider, you will have to ask them about their policy on retroactive cancellations. In most cases, you will need to show proof of insurance and the in-force date for your new policy.

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Prorating, Short-Rating and Avoiding Penalties

When cancelling your policy early, your insurance company may either prorate or short-rate your refund.

If prorated, you will be refunded the total premium amount for the coverage you did not use. For example, if you had a 12-month policy and you cancel after 10 months, you should receive a refund for the 2 months of coverage you did not use.

If short-rated, the car insurance company may take a cancellation penalty out of your refund. It would be best to check with your insurance company before deciding to cancel. If the fee is large enough, you may consider staying until the end of your term before switching companies.

If you decide to switch to a new policy upon your renewal date, you should not incur penalties. Notify your insurance company that you will not be renewing — as you would not want to pay for two insurance policies or have a non-payment policy cancellation on your record. This way you won’t have to deal with any refunds or cancellation fees.

Take the time to consider your options and see which decision will save you the most money.

Other Considerations When Cancelling

Lastly, consider your prior accident, discounts, and bundles when cancelling your policy.

Keep in mind, accident forgiveness typically doesn’t follow you between companies, but your driving record does. Make sure the new insurance provider has given you a quote based on the full disclosure of your driving history. If you omit this information, you won’t see true quotes. When you decide to switch, you could end up seeing higher rates for the accident that was forgiven through your prior insurer.

Longevity discounts will also typically be lost, along with multi-policy deals. Consider the impact this may have on your other insurance policy rates. Will your home insurance policy go up? Does the new insurance provider offer similar discounts? You may even consider moving all your existing policies to the new company. Depending on how good the provider really is, you may end up saving even more.

Making the Switch

Remember that it is your right to change car insurance companies whenever you like but keep in mind that you did sign a contract. It is also the right of the insurance company to charge cancellation penalties depending on the circumstances. Make sure the switch is really saving you money and providing you with the ideal coverage you’re looking for. Avoid any surprises by being prepared. Familiarize yourself with what’s included in your current coverage, and what discounts you may not be able to transfer. If you are ready, compare rates and start saving with InsuranceHotline.com.