To switch car insurance companies, purchase a new policy from a different insurer and then cancel your existing coverage. You can cancel your current coverage at any time, but you should always wait until you have already purchased a new policy in order to avoid a lapse in coverage.
1. Decide how much coverage you can afford
State laws determine how much car insurance is mandatory and what types of coverage drivers need to carry. Plus, if you drive a leased or financed car, your lender or lessor will almost certainly require you to purchase collision and comprehensive insurance.
It’s a good idea to purchase as much coverage as you can afford, even if it’s more than your state requires. Accidents can often cause damage beyond a state’s minimum liability limits, and drivers are financially responsible for any damage they cause that is not covered by their policy.
2. Comparison shop for quotes & check for discounts
Once you’ve decided how much coverage you want to buy, it’s time to compare quotes between insurance companies. This step is important because insurers calculate premiums differently, so prices vary widely even for the same driver. A common rule of thumb is to compare quotes from at least three companies.
When comparing quotes, make sure that the prices are for the same coverage types and limits. For example, the cheapest company for a liability-only policy will be a lot less expensive than the cheapest company for a full coverage policy. Also be sure to consider discounts when you’re comparing rates. Some discounts may already be factored into a quote, but you can always contact the insurance company if it’s unclear whether a certain discount is included.
In addition, it’s worth noting whether the insurer offers any added benefits. For instance, all the major car insurance companies offer inexpensive roadside assistance, and some insurers offer free accident forgiveness for qualifying customers.
Learn more about comparison shopping for car insurance quotes.
3. Evaluate the new company
Price isn’t the only thing that matters when you’re purchasing a new car insurance policy. Luckily for potential customers, there are several ways to evaluate an insurer’s customer service record. For instance, WalletHub editor ratings for each company take a variety of factors into account, including customer complaints, transparency, and ease of filing a claim.
You can also take advantage of organizations like the Better Business Bureau (BBB) and the National Association of Insurance Commissioners (NAIC). The NAIC and BBB both track customer complaints, so you can see the company’s overall complaints score in relation to other insurers. Your state’s insurance regulator may provide helpful information as well.
Keep your personal preferences in mind, too. For example, if you’re tech-savvy, you might want to look into larger insurers that allow you to file a claim or change your policy via their website or smartphone app. On the other hand, many companies sell through agents who can walk you through purchasing a policy or filing a claim.
Finally, you can always ask family and friends if they’ve had good or bad experiences with various insurance companies.
4. Communicate with your current insurer
You should be honest with your current insurance company if you’re considering switching coverage. In fact, your insurer might be able to match a competitor’s offer, depending on the circumstances.
If you do decide to switch companies mid-policy, you’ll want to see whether your insurer charges a cancellation fee. Most insurers do not charge a fee, but sometimes canceling mid-policy will cost you a flat amount or a percentage of your remaining premium. If you don’t want to pay such a fee, you can always wait to switch until it’s time to renew your policy.
5. Avoid a lapse in coverage
A lapse in coverage is an industry term for going without insurance, even if it’s just for a short period of time. Allowing your coverage to lapse is a dangerous game, because you’ll have to pay out of pocket for any accidents that you cause as well as face legal consequences. In almost every state, driving without insurance is illegal, and penalties include fines, license suspensions, and jail time.
The best way to avoid a lapse when switching car insurance companies is to have your policies overlap by a day or so. This way, you can ensure continuous coverage. Most insurers offer lower rates for customers who have been continuously covered for the past few months or years, so you’ll save in the long run by preventing a coverage lapse.
It’s also worth taking a few minutes to officially cancel your old policy, because otherwise the company will assume that you simply stopped paying your bill. Most companies let customers cancel a policy by calling customer service or their local agent. Some insurers require you to provide at least 24 hours’ notice when canceling, so be sure to clarify when your policy will actually end.
If you paid your entire premium in advance, you are entitled to a pro-rated refund, minus any cancellation penalties.
6. Notify your lender or lessor
If your car is leased or financed, you should contact your lender or lessor immediately upon canceling one car insurance policy and purchasing another. Dealerships and financing companies want to protect their investment, so they are strict about ensuring that their customers have sufficient insurance.
If you fail to notify your lender or lessor about a new policy, they might assume you are driving without insurance. And if the insurance on a financed car lapses, your lender might buy an expensive force-placed insurance policy, which you would have to pay for.
It’s also worth double checking whether your dealership or financial institution has specific coverage requirements, since these are non-negotiable. For instance, some lenders will mandate a specific deductible amount to be sure that you can afford it in the event of an accident.
7. Print or download your new proof of insurance
When you purchase a new policy, your insurer will usually send you a car insurance card via mail or email, which you can use as proof of coverage. Almost every state also accepts digital proof of insurance, which is usually available on the company’s website or smartphone app.
Learn more about state by state requirement on proof of insurance.
When to Switch Car Insurance Companies
You should consider switching car insurance companies after a major life change like moving, buying a new car, or getting married, since these changes can affect your rates and you may find cheaper car insurance elsewhere. If you need to make changes to your policy or your insurer is increasing their rates, this is also a good time to shop around for a better deal.
- After you move. Each state has its own laws and regulations that can affect your car insurance coverage and rates. It’s a good idea to compare rates from other insurance companies for your new state to make sure you’re getting the best deal.
- After you get married. Getting married can reduce the cost of your rates since insurers see individuals who are married as less likely to file expensive claims.
- After you buy a home. Buying a home can affect the discounts you may be eligible for. For example, you could qualify for a multi-policy discount, the amount of which varies from company to company. By switching to a new insurer and bundling your home and auto coverage, you could boost your savings.
- When there’s a change to your driving record. Being convicted of a moving violation will go on your driving record and will likely result in higher premiums when your policy is up for renewal. If you’ve recently been convicted of a moving violation, it’s worth getting a few quotes from other insurance companies to see if you could get lower rates elsewhere.
- When your current policy is up for renewal. If your current policy is up for renewal, it is a good time to compare quotes from other insurance companies and see if you could be getting a better rate elsewhere.
- When you are making changes to your policy. If you are making significant changes to your policy, such as switching from state-minimum coverage to a full coverage policy, you should shop around and compare rates from other insurance companies to make sure you’re getting the best deal.
- When your current policy increases in price. If your current insurance company increases your rates, you should get quotes from a few other insurance companies.
Learn more about when to switch car insurance companies.
How Much You Can Save by Switching Car Insurance Companies
The average cost of a state-minimum car insurance policy was $1,407 per year in 2022. Insurers commonly claim you’ll save 10% - 20% by switching, which would represent savings of roughly $70 - $140 per year, based on those averages.
However, some companies suggest much more savings may be possible:
- USAA has claimed an average of $707 in annual savings.
- Progressive suggests that new customers save an average of $750.
- 21st Century Insurance claims that drivers who switch save an average of $371.
- Geico famously claims 15 minutes could save you 15% or more on car insurance.
No single insurer will have the best rates for everyone, so not every shopper will save by switching to any one particular company. But in general, the opportunity to save money by switching car insurance companies is real.
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