How to Switch Car Insurance Companies, and Save Money

Consider switching car insurance providers on a regular basis to save money.

While it may be tempting to stick with your current auto insurer for years, you may be spending more money than necessary on your auto insurance policy. Experts say that shopping around and comparing rates at least once a year is one of the oldest and most reliable ways to see if you're overpaying for auto insurance.

“It's probably not worth switching insurance companies if you're only going to save $5 per month. But if we're talking about $20 a month, that's about $250 a year or more, and that's something you should look into,” says Jason Newell, managing insurance broker at 303 Insurance Brokers in Denver, Colorado.

You can change car insurance providers at any time, and most companies will not penalize you for doing so. Insurers frequently claim that switching will save you 10% to 20%, which equates to savings of $165 to $335 per year based on the average annual cost of auto insurance. Although not every driver can save that much simply by switching, many do find significant discounts. For example, USAA claims that switching saved its customers more than $700 on their annual premium.

It is fairly simple to switch from one auto insurer to another. To do it smoothly, follow these steps.

1. Research and Compare Auto Insurers

Before making a change, you should conduct some research. Begin by obtaining car insurance quotes from at least three to five different companies. To ensure an accurate comparison, enter the same coverage types, limits, and deductibles as your current policy when entering your information to get quotes. The only exception is if your needs have changed and you require entirely different auto coverage.

Once you have a few quotes, compare them to your current auto insurance rate to see if you are overpaying for the same amount of coverage. You can also hire an independent insurance agent to do the legwork for you.

When it comes to auto insurance, price is important, but don't overlook other factors such as customer complaints and coverage options. You may end up with a lower rate, but you don't want to have to switch companies again in a few months due to poor customer service or a frustrating claims process.

“You want to find that intersection: a strong company with a competitive rate,” Newell says.

It also never hurts to keep an eye out for perks that could come in handy later. For example, GEICO will give you a 22% discount if you don't have an accident for five years.

2. Decide if the Time is Right

You do not have to wait until your auto policy expires to change car insurance providers. Here are some scenarios that may pique your interest in learning how to switch car insurance.

Your driving habits have shifted: where you drive, how far you drive, and where you park your car all have an impact on your insurance premiums. If your driving habits have significantly changed in the last year, it may be worthwhile to contact a few insurance companies to see if you can get a lower rate.
You're adding a car or driver: When you add a new driver or car to your policy or bundle policies, you can usually get a discount. If you can get a better deal with another insurer, it might be worth switching.
You've had a significant life change: You should also consider switching after major life events such as turning 25, purchasing a home, or marrying. These life events have an impact on your auto insurance rates and can even help lower them in some cases.
Your policy is about to expire: Do some research a month or two before your policy's renewal date to see if there are any better rates available.

3. Talk to Your Current Auto Insurer

Before you commit to switching, speak with your current auto insurer and let them know you're looking for a better deal. Your car insurance company doesn't want to lose your business, so see if it's willing to match or beat competitor car insurance quotes. That would also be a good time to see if you are eligible for any additional discounts from your current insurer.

If they are unwilling to work with you, inquire about their cancellation policy. Every insurance company handles policy cancellations differently, and some may require paperwork, such as a signed cancellation notice. It is critical to cancel your old one as soon as possible, or your former insurer may continue to bill you.

4. Ask About Cancellation Fees and Refunds

Inquire with your insurance company ahead of time about any fees or possible refunds. Most major insurers let you cancel your auto policy at any time for free, but some charge a fee if you cancel in the middle of your policy term.

“You want to know if there will be any cancellation fees. Many companies do not charge one, but some will charge a $50 cancellation fee,” Megan Shepherd, an insurance analyst at finder.com, a comparison website, says. “In other cases, it may be 10% of your remaining premiums.”

If you cancel your policy before it expires, Esurance says it may charge you 10% of your remaining premium balance or a flat fee of $30–$50.

Before your policy expires, insurance companies will usually refund any unused auto premiums with no questions asked. If you purchased an annual policy but decide to change after six months, your insurer should reimburse you for the remaining six months of coverage (minus a possible cancellation fee).

5. Avoid a Lapse in Coverage

To avoid a lapse in auto coverage, you'll need to be extra cautious. Customers who have gone without auto coverage for an extended period of time will face higher rates from insurers. However, you can get around this by starting your new policy on the same day your old one officially ends.

“Normally, insurance will begin at 12:01 a.m. on the first day of the policy. You want to make sure your new policy goes into effect the same day, so you don't have an unintentional insurance lapse. Even a 24-hour insurance lapse can have serious consequences,” says Newell.