Switching Car Insurance Companies: When You Should Do It

Switching Car Insurance Companies: When You Should Do It

You have the option to switch car insurance providers at any time, including mid policy, not just when your insurance is up for renewal.

Changing car insurance companies can save you a significant amount of money on your premium, and there's very little downside to shopping around for the cheapest price.

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Even if you've paid for your car insurance on an annual basis, you can get a prorated refund from your old insurance company when you cancel coverage midyear. However, you may have to pay a small cancellation fee, depending on your existing insurance company's policy.

Why switch auto insurance companies?

The main benefit of switching car insurance providers is saving money on your premiums. Even if you found the cheapest rate when you first signed up for insurance, the formulas insurers use to set insurance premiums change frequently, so the company that gave you the lowest price two years ago might not be the best option now.

And if any life circumstances that impact your car insurance rates have changed—like you bought a new car, added a new person on your policy or you moved—there's an even bigger possibility you'll be able to find a better rate. Below we list the cheapest car insurers by their average six-month rate.

Six-month Rate
2Farm Bureau Mutual (IA Group)$218
4Auto-Owners Insurance$324
5State Farm$356
6American Family$405

Insurers with an asterisk offered quotes in at least 20 states.

Of course, a low premium isn't the only thing to consider when choosing an insurance company. If you have had a bad customer service experience with your current provider, or are interested in a benefit or perk that a different car insurance company offers, you might consider switching, too. Some examples include free roadside assistance, or gap coverage for the lease or loan on a new car.

When should I switch to a new car insurance company?

There's never any downside to shopping around for a better price than you're currently getting on car insurance, so you can check for better rates as often as you want. But you're especially likely to find a big difference in price when you experience a life change that impacts how insurance companies calculate their rates.

For example, your current company might offer the best rates for single drivers, another insurer might offer a better price to a married couple, so it can be a good idea to shop around after you get married.

Times to Check For Better Deal on Car Insurance

  • Any time you add or remove a driver, especially a teenager
  • Before you buy a new car
  • When you move, especially to a different state
  • One month before your current policy renews (and you get your new rates)

It's not a specific time, but one other notable situation to shop around for insurance is in the years following an at-fault accident or driving violation. If your rates went up because of an accident or speeding ticket in the last few years, it's worth checking back every six months or so to see if you can get a lower rate, as your rates will gradually decrease.

But every car insurance company weighs traffic accidents and violations differently. For example, one company might stop penalizing you for being at fault in an accident after five years, while others might do so after just three.

You can switch insurers even when you have an open claim

Switching insurance companies won't have any impact on an open insurance claim you have. There's no penalty to doing so, and your current insurer will still pay out the claim as it normally would, even if you stop coverage from them. However, keep in mind that you'll have to deal with with two car insurance companies simultaneously until the claim is paid out.

Switching might not be worthwhile if you've had a recent accident

While there's no time when you should outright avoid shopping for a better deal on car insurance, you're much less likely to save money by switching if you've been in an accident or have been convicted of making a traffic violation since your last policy renewal.

Getting in an accident or getting a ticket can raise your rates, but insurance companies generally only recalculate your premium at renewal time.

So if you cause an accident today and your insurance policy won't renew for six months, that's a half-year of paying your old preaccident rate. On the other hand, if you switch insurers right after you get in an accident, your rates will reflect the incident immediately.

When does it make sense to stay with the same insurer?

While switching insurers can end up saving you money on car insurance, there are sometimes good reasons to stick with the insurer that you currently have. If you're considering a change, it may be useful to consider the advantages that you might be giving up by leaving your old insurance company. This way you'll have a way to compare the costs of switching as opposed to the benefits.

Loyalty and bundle discounts

Many insurance companies try to stop competitors from taking their business by offering loyalty discounts for long-term customers. For instance, Amica offers progressively larger premium discounts to customers the longer they stick with the same insurer, starting at two years.

Bundle discounts are another way insurers encourage people to stick with the same policy. Bundling your car and home insurance may be giving you significant savings on both policies. For instance, State Farm offers up to 18% off your car insurance premium if you also have homeowners coverage.

Accident forgiveness

Accident forgiveness can potentially save you thousands, making it a valuable benefit for long-term customers. Most companies only offer accident forgiveness after three or more years of continuous coverage, so switching companies may mean losing access to this feature for some time.

The nation's top five auto insurers require you to maintain an average of 5.4 years' worth of claim-free coverage before accident forgiveness is available. Geico and Allstate do allow you to pay a fee for immediate accident forgiveness, but that obviously entails an added cost. At the extreme end, Erie Insurance gives customers accident forgiveness for life if they stay with the company for 15 years.

How to switch your car insurance

The first step to switching car insurance companies is shopping around for a new company. Take your time to find the right mix of low price and good customer service, especially if you don't urgently need a new policy. The more insurers you check with, the better, but make sure you collect at least three to five quotes from different types of insurers—online-only, captive agent and independent agent. Take a look at the average rates for drivers in your area, so you can understand what's considered a competitive price.

While you're collecting quotes, think carefully about whether your coverage needs have changed and whether there are any new discounts you might now be eligible for.

  • Has the value of your older vehicle dropped enough that you can remove collision coverage?
  • Are you driving at night more, increasing your risk of an accident to the point where you want to increase your liability coverage?
  • Does your new car support using a telematic driving tracker, meaning you could qualify for additional discounts with some insurers?

After you've found the best price for insurance, give your current provider a call before you commit to switching to the new company. See if your current company will match the quote you got from their competitor, and ask in detail about the company's cancellation process. You may need to give your insurer advance notice to cancel your policy—sometimes as much as 30 days—as well as pay a small fee to cancel your policy, though you will receive a refund for the majority of your unused premium once you cancel.

Four of the largest insurers in the U.S.—State Farm, Geico, Allstate and Farmers—don't penalize you for canceling a policy midterm. Progressive is the exception, though the fee varies by state: For example, Progressive's cancellation fee is $50 in New York.

The Cost of Canceling Car Insurance, By Company

Cancellation Fee?
State FarmNone
ProgressiveYes, amount varies by state
Liberty MutualNone
EsuranceYes, 10% of remaining balance or $30–$50 flat fee
The HartfordNone
The GeneralYes, 10% Remaining Premium
Show All Rows

Making the switch to a new company

Once you've decided to switch insurers, purchase your new policy and confirm it's active. Once you have proof of insurance from your new provider, contact your previous insurance company to cancel your policy. You'll receive a refund for however much time you have left on your policy if you're switching midpolicy, so do this promptly to get a bigger refund.

One important note: Make sure to avoid even a brief gap in car insurance coverage.

Driving without insurance can cause you to lose your license, and even if you aren't caught, gaps in coverage can eventually lead to your premium increasing significantly. It's much better to have a few days of double coverage than to take the risk of being uninsured.

What to do after switching car insurance policies

If you have a lease or loan on your car, make sure to notify your lease provider immediately after changing insurance companies. Most car leases and loans require you to carry insurance, and if your loan company thinks you've canceled your insurance, it may repossess your car or purchase a separate policy for you.

The only time your insurer may drop you as a customer is during the first 60 days your new car insurance policy is in effect. So during this time, be extra careful to avoid accidents and violations, so you aren't stuck without car insurance or needing to find alternative coverage.

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