Switching car insurance may be a wise decision, especially if you have recently relocated or purchased a new vehicle. Many people are unaware that auto insurance premiums can fluctuate in response to major life events, and that you can sometimes save money by simply switching providers. Car insurance premiums are calculated differently by each insurance company. If you move to a different ZIP code, for example, a new provider may be hundreds of dollars less expensive.
Of course, you might not want to save money. You might simply want different or better coverage. Whether you've recently married or are about to let your teen drive, you'll want to shop around and compare different providers to ensure you have the best car insurance for your needs.
When should you switch auto insurance companies?
Although you can change car insurance companies at any time, there are many situations that necessitate looking for a new one. These circumstances may include:
Transferring to a new ZIP code, city, or state: Your city, state, and even ZIP code may all have an impact on your car insurance premium. If you are relocating, now might be a good time to look into a new car insurance company to see if rates are more competitive in that area
Adding a driver or vehicle: If your teen is about to get a driver's licence or you're adding a new car to your household, get quotes from other insurance companies. Every company has different rates, and many offer student discounts, so you might be able to find a company that offers a lower premium for your new driver or vehicle.
Having a life event: Life events such as getting married, buying a home, or having a child can have an impact on your insurance needs and premium. Under these circumstances, updating your current policy or looking for a new one may be a good idea.
Approaching your renewal date: You can change your car insurance policy at any time, but your renewal date provides an especially convenient opportunity to do so. You may be less likely to have to deal with small bills or refunds on the old policy if you cancel your old policy on its renewal date and begin your new policy on the same date. The most important thing is to avoid gaps in coverage, which can leave you financially vulnerable and increase the cost of future premiums.
While switching carriers can have benefits, there are times when switching insurance companies is not a good idea. If you have just filed a claim, for example, you will most likely be unable to switch carriers. If the claim is not settled and paid, your new car insurance company will not be able to properly rate your policy. This could result in a significant increase in your new policy at renewal, a retroactive charge to account for the increased risk that the new company was unaware of, or even a cancellation for misrepresentation if you did not notify your new carrier of the claim.
1. Think about your insurance options
You may be financially exposed if you have insufficient insurance, but having too much coverage may mean you are paying too much. Consider switching car insurance if you believe you are overspending. “Ask yourself if you drive an older vehicle. If you do, you might not need collision and comprehensive insurance, or you might choose a higher deductible to save money,” insurance expert Michelle Demora says.
Finally, the more coverage you add to your auto insurance policy, the higher the premium. Understanding the various types of car insurance coverage — and which ones you require — is an important first step in determining how to switch auto insurance.
2. Examine potential penalties
If you decide that switching car insurance is the best option for you, find out if there are any penalties for changing before the coverage period expires. Fortunately, most auto insurance companies allow you to cancel your policy at any time as long as you provide proper notice.
While most insurance companies will refund any unused premiums, some may charge a fee if you cancel during the course of your policy term. Before cancelling your policy, you should check with your company's customer service department or your agent to see if there are any cancellation restrictions.
If you learn that there will be a penalty for cancelling in the middle of your term, you may want to reconsider switching policies. If you can find a new policy with a premium that covers any cancellation fees charged by your old carrier, switching companies may still make sense.
3. Compare car insurance quotes from various companies
If you've decided that it's time to switch carriers, the first thing you should do is get quotes from several different auto insurers. You will be able to compare auto insurance premiums, coverage options, and discounts as a result of this. Just make sure you get quotes for the same coverages so you can compare premiums apples to apples.
“When it comes to shopping for new products and services, family members and friends are invaluable resources,” says Demora. “A lot of the time, they've already done the legwork to provide useful advice and narrow your search — and finding the right auto insurance provider is no exception.”
Whether you get quotes online, over the phone, or in person, you should be prepared with some basic information. To obtain an accurate quote, you must provide the following information:
The address where the vehicle will be stored
Vehicle identification number (VIN), year, make, and model
A driver's licence or a social security card (car insurance providers will use this information to look up your driving history and any other personal factors that might affect your premium)
While researching companies, you can also look into available discounts. Asking companies to include all of the discounts you are eligible for on a quote could help you find less expensive coverage.
4. Make contact with your current carrier
While you're getting quotes from other companies, it might be a good idea to contact your current car insurance company. Although your company will not be able to offer you a lower rate simply to keep your business, you may be able to identify discounts and other savings opportunities that you are currently overlooking. Your agent may have suggestions for ways to reduce your costs, such as keeping a clean driving record or purchasing a less expensive vehicle.
This step is especially important if you have insurance through an independent agency. Unlike captive agents, who only sell insurance products from a single company, independent agents can represent a variety of insurance companies. An independent agent may be able to shop your policy with their carriers in order to find you a lower rate while keeping your policy with the same agency.
5. Conduct research on the new company\
Before purchasing a policy, you should conduct extensive research on the insurer. Some useful resources are as follows:
The National Association of Insurance Commissioners (NAIC): The NAIC assigns each company a score based on the average number of complaints received. A score greater than 1.00 indicates a higher-than-average number of complaints, while a score less than 1.00 indicates a lower-than-average number of complaints.
AM Best: AM Best is a good resource to use if you want to learn more about a
company's financial strength. AM Best assigns a letter grade financial strength score to companies, which can indicate how likely a company is to pay out claims.
6. Avoid coverage gaps
“When switching insurance policies, it's best to do so just before your current policy expires,” says Demora. “Switching early prevents you from having a coverage gap.”
A lapse in insurance coverage may result in serious legal and financial consequences, particularly if you are involved in an accident while uninsured. If you cause an accident and do not have insurance, you will be responsible for the damages, including any medical bills, out of pocket. Even if you are not at fault, most states require insurance companies to file proof of insurance with the DMV if police are called. Your licence may be suspended if you do not have insurance.
Driving without insurance may result in insurance companies charging you higher premiums in the future because they will perceive you as a high-risk driver. Your new insurer should be able to time the start of the new policy to coincide with the end of your old coverage.
7. Ensure that your previous policy is cancelled
If you're switching car insurance companies, don't assume that if you stop paying your premiums, your policy will be cancelled. If you have auto-renewal set up, your current provider may report you to credit bureaus for nonpayment. When switching to a new car insurance company, most insurance experts recommend contacting your current auto insurance provider to cancel your policy.
To cancel your previous policy, take the following steps:
Inform your current insurance company that you are terminating your policy. This will prevent them from billing you for additional coverage in the future
If you signed up for automatic payments, you may need to log into your online account and cancel the automatic withdrawals. If you pay your premiums using your bank's bill pay service, make sure to cancel the payments with your bank.
Request that your carrier confirm the termination in writing.
Each insurance company has its own policy cancellation procedure. You may be required to sign a form authorising the cancellation, or you may need to call and speak with an agent directly. Some companies may allow you to cancel online, but you may prefer to put it in writing or speak with someone to confirm the cancellation.
8. Create new car insurance ID cards
Once you've officially cancelled your old policy and begun your new one, replace your old insurance ID card in your vehicle or wallet with an updated one. If you are pulled over by the police or are involved in an accident, you will need to show proof of coverage from your new provider
“Most insurers allow you to access your ID card online via your smartphone, but it's best to have a hard copy in case you're stopped in an area without cell service,” Demora explains.
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