Auto Insurance Basics

How to Switch Auto Insurance Companies

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Car insurance is a competitive market. In any area there are usually no less than five companies vying for your business, claiming they are the best car insurance around. The cutthroat market has made it so companies are always trying to lower their rates. When it comes to auto insurance, loyalty sometimes can get you a discount, but other times, it could cost you a lot of money. Every year you should shop for car insurance to see if you are still paying the best possible rate. In this article, we discuss all the things to keep in mind when switching car insurance companies. 

When Should You Tell Your Current Company? 

Your current company will want some notice about your cancellation. Typically, 30 days prior to cancellation is a good amount of time. Not only does it ensure you won't still be billed by your company, it is also enough time for them to try to win back your business. Your cancellation notice may actually entice your company to offer a better deal in order to keep you. Suddenly there may be a discount you didn't know you qualified for. Letting your company know in advance is only beneficial toward you. 

What is the Cost of Cancelling a Car Insurance Policy? 

Cancelling an insurance policy is relatively inexpensive, or even free for some companies. In the table below you can see how each company compares for cancellation fees. 

Company Cancellation Fee?
State Farm None
GEICO None
Allstate None
Progressive  No, but $50 if done within 6 months of getting policy
Farmers None
Liberty Mutual  None
Travelers  None
Esurance  Yes, $50 flat fee
The Hartford None
The General Yes, 10% Remaining Premium
USAA None
Nationwide None
Mercury Yes, 10% of Remaining Premium
21st Century Yes, $50 flat fee

The largest companies, like State Farm, and Allstate, all have no cancellation fee. You may cancel with those companies at any time without being charged. A company's policy may change state to state however, so you should always double check by calling up your company or agent. 

What If You Already Paid Your Premium? 

You may have some money already tied up with your company. Many companies require you to pay some sort of amount up front when starting a policy. Some drivers even opt to pay their full premium up front as well. Luckily, if you choose to cancel mid-term, you will be refunded the entire amount you have already paid. You do not need to worry about not getting your money back. 

Watch Out For Gaps in Coverage

Gaps in insurance can be troublesome for you in the future. When you cancel your policy, it usually takes effect that night, so the next morning you are officially uninsured. Ideally, you want your new policy to start the next day, just as your old policy ends. If you go too long without insurance, you may be faced with fines and even raised rates. Should you get into an accident uninsured, the cost can be financially ruinous, on top of your license being possibly suspended. Waiting too long to start a policy may make you seem risky in the eyes of your new insurer, causing your rates to be higher. You should have the start date of the new policy verified before cancelling the old one.  

Make Sure Your Policy is Actually Cancelled

As a precaution, it is a good idea to get your cancellation from your old company in writing. You do not want to still be making payments after cancelling. If you have autopay set up, make sure that is cancelled as well. In this case, it pays to be extra careful. 

Final Thoughts 

Overall, cancelling an auto insurance policy is fairly straightforward and painless when compared to other policy cancellation processes. If you are moving between large companies, there should be none, or very little cost. Just remember to ask for your refund and to ensure your new policy will start as soon as your old one finishes. 

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