How to Change Car Insurance Companies

When it comes to buying car insurance, loyalty doesn’t always pay. Whether you’re fed up with your insurer’s customer service or you’ve found a deal you can’t pass up, you’re always free to change car insurance providers. But while you can switch car insurance at any time, there are several considerations to take into account in order to avoid coverage gaps and unnecessary costs.

Note: These tips should not be considered official insurance guidance. Please consult an insurance professional or broker when making decisions regarding insurance.

When to Switch Car Insurance: Timing Your Move

The beauty of the car insurance market is its flexibility; you generally aren’t locked into a contract and can switch companies at any time, even mid-policy. However, the “when” can still have a major impact on your experience.

Mid-Policy vs. End of Policy

While you can switch insurers in the middle of your policy term, it’s often simpler and more cost-effective to make the change when your current policy is up for renewal. Switching at renewal usually helps you avoid potential early cancellation fees that some insurers might charge. In case your policy is set to auto-renew, be sure to proactively inform your current insurer that you won’t be renewing to prevent an unwanted charge.

But you don’t always need to wait out your current term. If you find a significantly better rate or coverage that can’t wait, switching mid-policy is still a viable option. Just be sure to check your current policy for any cancellation penalties. If it turns out that your insurer does charge an early cancellation fee, calculate the costs against your potential savings.

When to Review Your Insurance Options

Beyond just chasing a lower premium, several life events and circumstances should prompt you to review your car insurance:

• Policy Renewal: At least once a year (or every six months if that’s the length of your policy), when your policy is due for renewal, is a prime time to shop around and ensure your current coverage and rates are still competitive
• Rate Hikes: If your premium has jumped unexpectedly, it’s a clear signal to see what other insurers can offer
• Major Life Changes: Significant life events often impact your insurance needs and costs. Consider shopping for new insurance if you’re:

• Moving, especially to a new ZIP code or state
• Getting married
• Buying a new car, or adding or removing a vehicle from your policy
• Adding a new driver, particularly a teen
• Changing your driving habits (e.g., new job with a different commute, retiring, working from home)

• Poor Customer Service: If you’re dissatisfied with your current insurer’s service or how they’ve handled a claim, it might be time to find a company with a better reputation
• Credit Score Changes: A significant improvement in your credit score could qualify you for lower rates
• Evolving Coverage Needs: If you need specialized coverage (like for a classic car) that your current insurer doesn’t offer or offers at a high price, switching might be necessary

What About Open Claims or Recent Accidents?

You can still switch insurance providers even if you have an open claim with your current insurer. Your old insurer will remain responsible for handling that existing claim. However, be aware that an open claim, especially if you’re at fault, will be part of your claims history and could affect the rates offered by new insurers. Similarly, an at-fault accident will likely increase your premiums whether you switch or stay, but it doesn’t prevent you from changing companies.

What to Do Before You Make the Switch

Before you jump to a new insurer, a little preparation can save you a lot of money and potential headaches down the road.

1. Gather Your Information

To get accurate quotes, you’ll need to provide some key details. Having this information ready will streamline the process:

• Driver Details: For everyone on the policy: Full names, dates of birth, driver’s license numbers, and driving history (accidents, violations).
• Vehicle Details: For all cars to be insured: make, model, year, vehicle identification number (VIN), estimated annual mileage, primary use, and where it’s garaged.
• Current Policy Information: Your current policy’s declarations page is invaluable. It shows your current coverage types (liability, collision, comprehensive), limits, and deductibles.

2. Aim for an “Apples-to-Apples” Comparison

When comparing quotes, ensure you’re looking at the same levels of coverage, limits, and deductibles. A cheaper quote might simply mean less coverage, which could leave you vulnerable.

• Coverage Types & Limits: Match these across quotes. You can’t compare a full coverage policy at GEICO to a liability-only policy at Allstate. Find out how much of each coverage type you have and get quotes for those exact limits.
• Deductibles: Ensure the deductible amounts for collision and comprehensive coverage are consistent. A higher deductible usually means a lower premium, but more out-of-pocket expense if you file a claim.
• Policy Term: Compare quotes for the same term length (usually 6 or 12 months).

3. Look Beyond the Premium

Sometimes the cheapest policy isn’t the best one– and it could cost you down the line. Consider these factors:

• Customer Service & Claims Handling: Research insurer reputations. How well do they handle claims? Are they responsive to customers? Check reviews and ratings from sources like J.D. Power or Consumer Reports.
• Financial Stability: Choose an insurer that’s financially sound and capable of paying claims. Ratings from A.M. Best can help here.
• Available Discounts: Ask about all potential discounts (bundling, safe driver, multi-car, etc.). Then compare the final price after discounts.
• Policy Features & Technology: Consider conveniences like mobile apps, online policy management, and telematics programs.

4. Understand the Financial Implications

• Cancellation Fees: Some insurers charge a fee for early cancellation, which could be a flat amount (often under $100) or a percentage of your remaining premium. Others, like GEICO and State Farm, generally don’t for auto policies. Always check your current policy or ask your insurer.
• Refunds for Unused Premiums: If you’ve paid in advance and cancel mid-term, you’re usually entitled to a refund. This may be prorated, meaning that you get back the exact amount for the unused portion of your policy. Or, if they charge an early cancellation fee, it may be short-rated, meaning they’ll deduct a penalty from the prorated amount.
• Loss of Loyalty Discounts: Switching means you’ll lose any loyalty discounts from your old insurer. These can range from 5% to 20%.3 However, the new insurer may offer new customer discounts or other perks that offset this. Don’t let loyalty alone keep you from a better deal; shopping around often yields greater savings.

How to Change Car Insurance Companies: A Step-by-Step Guide

Once you’ve done your homework and picked a new insurer, follow these steps for a smooth transition:

1. Research and Compare

You’ve already done this if you followed the advice above! This involves getting those apples-to-apples quotes and considering factors beyond just price.

2. Secure Your New Policy

The most important thing to remember is that you need to purchase and activate your new car insurance policy before you cancel your old one. A lapse in coverage, even for a single day, can lead to severe financial and legal problems.

Align the start date of your new policy with the cancellation date of your old one. Ideally, they should be on the same day to ensure there’s no gap.

3. Cancel Your Old Policy (and Get Proof)

Only after you have confirmation that your new policy is active should you cancel your old one. Contact your previous insurer or agent and find out their preferred method of cancellation. Depending on the carrier, they may allow you to terminate over the phone or online, or they may require written notice.

Always be sure to get written confirmation of the cancellation from your old insurer, specifying the exact date and time the policy terminated. This is your proof in case you’re mistakenly charged after the cancellation date.

4. Notify Your Lender or Lessor (If Applicable)

If you have a loan or lease on your car, you must inform your lienholder (lender) or lessor about the change in insurance. Your new insurer will typically need to send them proof of the new coverage. Failure to do so can lead to serious issues, including the lender force-placing expensive insurance on your vehicle.

5. Get Your New Insurance ID Card

Your new insurer will provide an ID card (physical, digital, or via app). You’re legally required in most states to keep proof of insurance in your vehicle.

6. Inform Your State’s DMV (If Required)

Some states require you to notify the Department of Motor Vehicles (DMV) or equivalent agency of insurance changes. Check your local DMV’s rules, and feel free to reach out to your new insurer for guidance.

7. Follow-Up Actions

In a perfect world, you should be set once you’ve confirmed your new coverage is in place. However, it’s a good idea to make a quick checklist in case something falls through the cracks:

• Confirm with the old insurer that the policy is cancelled and no more payments will be drafted
• Cancel any automatic payments for the old policy from your bank or credit card
• If you’re expecting a refund, monitor its arrival

A Note on Credit Scores

Generally, switching car insurance companies itself won’t hurt your traditional credit score. Insurers usually perform “soft inquiries” for quotes, which don’t impact your score. However, unpaid premiums on an old policy could lead to collections and negatively affect your score.

Many insurers do use a “credit-based insurance score” (CBIS) to help determine premiums, which is different from your regular credit score but is influenced by your credit history. Good credit generally leads to a better CBIS and lower rates.

Securing Best Deal on Your Car Insurance

Switching your car insurance is a powerful way to take control of your auto expenses and ensure you have the best protection in place. But while it’s not overly complicated, it’s important to navigate the process tactfully to avoid unnecessary fees and penalties. When in doubt, talk to your current insurer to find out their rules and requirements before making a switch.

Looking to switch your car insurance? Find the best deal using our free quoting tool.