Posted : 11/10/2008
Regularly review your auto insurance coverage to make sure that you're receiving the best insurance value for your money. You'll discover that it pays to shop around. In most states, premiums for identical levels of coverage vary widely among different companies. The reason for this price variation involves many complicated factors, some of which are explained in "8 Things You Should Know About Auto Insurance."
One of the biggest factors is a company's claims experience with policyholders in your coverage group (e.g. people of similar age, number of accidents, type of vehicle, etc.). For example, if a large number of people in your coverage group files claims during a given year, your rates will likely rise. When this happens, better discounts and lower overall premiums may be available at other companies.
There are many reasons to switch car insurance companies. You might be unhappy with the service that your present company provides, or perhaps you've simply found another company willing to offer you the same level of coverage for considerably less money. Nowadays, performing a regular car insurance rate check-up and investigating your options has never been easier. When you decide to switch your auto insurance to another company, you'll find that it's fairly easy to do so.
Always have a new policy in place before canceling your old auto insurance coverage. You don't want to have a lapse in car insurance for even one day. Your new company will be able to time the onset of your new policy to coincide with the cancellation of your old coverage.
The best time to shop for insurance is about 3-4 weeks before your old policy is about to renew. Depending on the regulations in your state, a renewal notice will be sent to you approximately a month before your new policy period begins. The notice will describe your coverage, discounts, and your premium amount. Using that information, you can shop online for the same coverages to see your options.
All standard auto insurance policies contain a provision giving you the right to cancel your policy at any time, once proper notice is given to the insurance company. You don't need to wait until renewal time. However, cancellation before a policy has renewed makes the most sense. That way, you don't have to worry about recovering the unused portion of your paid premium. But if you choose to cancel in the middle of a cycle, the company will prorate your latest premium payment up to the cancellation date and return the remainder to you.
Unfortunately, some car insurance companies may charge a special "short rate" cancellation penalty if you cancel in the middle of a policy term, so be sure to ask before you switch. If they do charge a penalty, you'll need to decide if the better rate outweighs the fee you'll pay. Keep in mind that many companies offer earned accident forgiveness, future renewal discounts, and other benefits that grow with or depend on the amount of time you maintain a policy with that car insurance company.
Generally, all you need to do to cancel your auto insurance policy is to inform your insurance company in writing, specifying the date you want the policy canceled and the reason for the cancellation. If you've sold a car, you may be asked to provide a bill of sale, but only if you're asking the company to "backdate" the cancellation. If you are simply switching to a new company, there's no need to prove this, unless you're canceling a policy mid-term.
Most states' insurance laws actually require the company to confirm that you have a new policy for your car before cancelling your old policy. The reason is that most insurance companies have to report policies that are cancelled to the state insurance department, so the state can keep track of uninsured drivers. This helps reduce the number of uninsured drivers. If they let you cancel your old policy without proof that you had a new policy, they'd have to report you as uninsured.
Don't just walk away from your old policy without formally canceling it, because most policies are "continuous" - which means your policy will continue to be renewed every six or 12 months, unless you cancel it. If you fail to cancel, your auto insurance company will continue to bill you for insurance and will eventually cancel the policy for failure to pay. Then, you have bills to dispute and phone calls to make! It's usally easier to cancel in writing when you're ready to switch.
When you receive an offical policy cancellation notice from your car insurance company stating the date and time when your coverage will stop, you'll know your cancellation has been processed correctly.
Looking for different information? Have questions or comments? Please let us know.
Originally posted August 5, 2004.
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