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How to switch car insurance companies

By Insurance.com Posted : 04/10/2014

Change ahead sign

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 and compare car insurance quotes. In most states, premiums for identical levels of coverage vary widely among different companies. Auto insurers consider many factors when setting your rate -- your age, your driving record, where you live, the model of car you drive, among others -- and each company weighs these variables differently.

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 quote comparison and 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.

Be sure to get new car insurance first

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.

When to switch policies

The best time to shop for insurance is about three to four 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.

You don't have to wait until renewal

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. (See "How soon can I switch insurers?")

Will they charge a fee?

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.

How to cancel your old auto insurance

Generally, you need to cancel your auto insurance policy in writing. Send a letter to the company's customer service address with the following information:

  • Your name, printed or typed
  • Your full address
  • A request to cancel your policy, giving the policy number and effective date of cancellation.
  • A reason for the cancellation, such as "I have bought a new policy" or "I have sold the insured vehicle."
  • The name of your new insurance carrier and the policy number.
  • Your signature
  • Date of signature

See "How to cancel a car insurance policy" for a downloadable PDF you can send to your old insurance company.

Your prior carrier may want a copy of the declarations page from your new policy.

If you've sold a car, you may be asked to provide a bill of sale.

Is it legal for my old company to ask for my new policy?

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.

Confirm cancellation

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. It's much easier to cancel in writing when you're ready to switch.

Once a policy is canceled properly, you should expect a final notice confirming the cancellation and a pro-rated refund of your premium from the date of your cancellation through the end of your term.


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