Every year a letter arrives from your insurer with an offer to renew your car insurance policy. That presents you with a terrific opportunity to make sure you’re getting the best deal for the coverage you want.
While you can shop around any time for car insurance quotes, there are reasons why comparing your current policy and premium with what’s available from other insurers as your renewal date draws near may be to your advantage.
Almost all car insurance policies last for one year. When the term ends, you have the option of renewing that policy or switching to one offered by another provider.
The primary reason for taking the time to shop your existing rate and policy instead of automatically renewing it is to find out whether or not you can get the same protection from another insurer at a lower price. After all, there could be changes to your existing policy such as a rate increase or the policy terms may have changed.
Why do renewal rate increases happen?
Rate increases can happen for a variety of reasons:
- You may have a traffic ticket or conviction or an at-fault accident on your record.
- The insurance company may have made rate changes to your policy based on your risk profile.
- If you add a new driver to your policy.
- If you increase your coverage limits.
- There may have been a rate increase to all of the company’s policies even if you’ve filed no claims and don’t have any blemishes on your driving record. That could be due to the impact of insurance fraud, increased claim activities in your region, or changes in general within the insurance market.
No matter what the reason, it’s time to shop around. While a ticket or accident will follow you to another insurance company, they may not charge you as much for the same incident as your current company. A rate increase on your renewal is not something you have to accept.
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The benefits of switching on renewal
When you choose to shop around and switch to a new insurance company on your renewal date, you save yourself more than just the difference a lower premium can make.
First of all, insurance companies often charge penalties for cancelling your policy in the middle of the term. Some companies don’t charge a penalty but will use a system called short rating in which the money refunded to you is not the fully prorated amount you should get back. It is another way of penalizing you for ending the policy before the term for which it was rated. When you switch to a new company on your renewal date rather than renewing your old policy, you avoid any risk of penalties or short rating.
Switching at renewal time means you start paying the new company rather than renewing with the old one. That keeps your payments steady as you have planned in your budget. But be sure to inform your former insurer in writing that you will not be renewing with them. That way, there’s no chance you end up with an insurance cancellation notice on your record for missing a payment.
Questions to ask yourself if you choose to renew your policy
Suppose you compared quotes from a broad range of insurers but opt to stick with your current provider. Fair enough. But before you lock yourself in to another 12-month term, consider what changes may have occurred in your life or driving habits, since they may influence your premium. Ask yourself:
- Did you add a new driver to your policy?
- Are you commuting to work or are you working from home and driving fewer kilometres annually?
- Did you or do you need to change your coverages or coverage limits?
- Are you using your vehicle for business purposes such as delivering food?
- Do you have winter tires installed on your vehicle when the frosty weather comes round?
- Have there been any changes or upgrades to your vehicle such as adding an anti-theft device to it?
- Have you added a second vehicle to your policy?
You will also need to inform your broker or provider of any changes to your personal information like:
- A change of address if you moved since where you live can affect the rate you get.
- If you used to park in a private garage but are now parking on a street or vice-versa.
- Any traffic tickets, convictions, collisions (even minor ones) or licence suspensions.
- If you modified your vehicle in any way. For example, did you tint your windows or have changes made to its engine?
If you’re not ready to switch
While renewal offers a great opportunity to shop around, that doesn’t mean you have to make a switch. If you don’t find a better deal at renewal time, you can still go back and look at rates in the future. Shopping for car insurance is free, and it doesn’t mean you are obligated to switch insurance companies.
Getting quotes is always a great way to keep up-to-date on what is available to you. It may be your current policy is the best choice but taking the time to get quotes can give you the peace of mind of knowing you have the policy you need at the most affordable cost.