How To Switch Car Insurance Companies

You should switch your car insurance to a different company when you can find a cheaper rate for the same amount of coverage without sacrificing in terms of things like customer service. It's actually best to compare quotes and consider switching insurance companies every 6-12 months in order to minimize costs. It's also worth checking prices anytime you have a change in circumstance that will affect your rate, such as insuring a new car or adding a new driver.

When to Consider Switching Car Insurance Companies

When You Add a New Driver

Adding a teenager to your insurance policy costs 140% to 160% extra, on average. On the other hand, adding an experienced driver could increase or decrease your premium, depending on the exact scenario. As a result, it's well worth shopping around before simply accepting a new rate from your current insurer.

When You Reach a Threshold for Age or Experience

Car insurance rates vary dramatically by age, with particularly sharp drops when a driver turns 19 and 21 years old. Similarly, when a driver has been on the road for at least five years, they will usually be able to get a lower rate.

When You Add or Replace a Car

The cheapest insurer for an older car might not be the cheapest for a brand new car or a specialty vehicle, since each insurer calculates rates differently. If you're adding a vehicle, you should also factor in any multi-car discounts that are available from different companies.

When Your Driving Record Changes

If you were recently cited for a moving violation, each insurer will adjust your rates by a different amount, so switching could make sense. Similarly, some insurance companies will look back at only three years of your driving history, while others will evaluate a longer period. As a result, it's a good time to shop around for a better price when violations or claims reach the three-year milestone. Getting a copy of your driving record and your CLUE Report can help you time things right.

When Your Credit Score Improves

Your credit score can be a major factor in car-insurance pricing. If it has improved, let your current insurer know and then see if other companies can beat your insurance company's price.

When Your Insurance Needs Change

Financing a new car or paying off a loan may change the coverage types you need to carry. You may also want to reevaluate your policy limits and deductible.

When Your Marital Status Changes

Married drivers usually pay less for car insurance than single drivers, so make sure to notify your insurance provider about your nuptials. You should also take the opportunity to see if another insurer will offer a lower premium.

When You Become a Homeowner

Your status as a homeowner rather than a renter can affect your premiums. Insurers often charge lower premiums to homeowners, and you can also get a multi-policy discount if you insure your home and car with the same company.

When Your Education Level or Employment Changes

Earning a college degree will lower your rates with some insurers more than others. Some companies also offer a low-mileage discount, which could benefit you if you get a new job with a shorter commute.

No, it's not bad to switch car insurance companies often. Switching insurers can be a great way to save on your car insurance premium, though it's important to remember that you may be charged cancellation fees each time you switch companies mid-policy.

Progressive, Travelers, and Liberty Mutual are the only companies among the 10 largest insurers that charge cancellation fees, though smaller companies like AAA and Auto-Owners also have fees. If your insurance company charges a cancellation fee, then it's probably best to wait until it's time to renew your policy to switch insurers. 

If you decide that you want to switch insurance companies mid-policy, you need to contact your current insurer and let them know instead of simply not paying your premium. Even if you paid for your policy in full up front, you should still officially cancel the policy so that you can get a prorated refund.

To learn more, check out WalletHub's guide to switching car insurance companies. 

The best way to get cheaper car insurance is to compare quotes from multiple companies and then switch to whichever insurer offers the coverage you want at the cheapest rate. Other ways to get cheaper car insurance include taking advantage of discounts, improving your driving record, and raising your credit score.

10 Ways to Get Cheaper Car Insurance

1. Compare quotes every 6-12 months.

Every car insurance company calculates premiums slightly differently, so the quote you get from one company can easily be hundreds of dollars more expensive than another company's quote. Getting quotes from multiple insurers every time you need to renew your policy can help you realize if you're overpaying for the same amount of coverage. 

2. Take advantage of discounts.

All major car insurance companies offer a variety of discounts, which can save drivers as much as 35% in some cases. For instance, many insurers offer multi-policy and multi-car discounts, as well as good student and good driver discounts, and more.

3. Increase your deductible.

Raising your deductible will lower your premium, though it's important to choose a deductible amount that you can afford in an emergency. A car insurance deductible is an amount that you have to pay out of pocket before your insurer will cover the rest. Deductibles apply to several types of coverage, including collision and comprehensive insurance.

4. Improve your credit score.

Insurance companies use credit-based insurance scores, where allowed by state law since studies have shown that these scores effectively indicate a driver's likelihood of filing a claim. Given that insurance scores are based on credit report information, raising your credit score can help reduce your rate over time.

5. Consider usage-based insurance.

Usage-based insurance is a type of car insurance that calculates your premium based on your driving habits. Each company's usage-based program varies, but most consider your total mileage, braking, acceleration, and speed. These programs are ideal for safe drivers, especially those who do not use their cars for long commutes or frequent trips. 

6. Choose a car that is inexpensive to insure.

Cars that are particularly fast, powerful, and/or costly to repair are among the most expensive to insure. Insurers also charge higher premiums for cars that are more likely to be stolen. The next time you go car shopping, compare insurance quotes for different models in advance with this in mind. And if your premiums are prohibitively expensive now, consider trading in your vehicle for a car that is cheap to insure.

7. Take a defensive driving course.

In some states, insurance companies are required to give you a discount for completing a defensive driving course. Even where it isn't mandatory, insurers will sometimes provide a discount to encourage customers to improve their driving techniques.

If your insurer does not lower your premium just for taking a course, working on your driving skills will still pay off in the long run and help you keep your record clean. On that note, certain states also allow you to take a course in order to prevent driver's license points from affecting your car insurance rates.

8. Consider your coverage types and amounts.

All the different types of car insurance can make it difficult to determine what exactly is worth paying for. At a minimum, you need to fulfill your state's requirements and also purchase any coverage your lender or lessor requires. But beyond that, you can weigh whether each add-on coverage option is worth the price.

For instance, maybe you should drop uninsured motorist property damage insurance from your policy if you already have collision insurance. Or maybe you don't need rental reimbursement coverage anymore because you could borrow a family member's car if needed.

9. Practice good driving habits.

Moving violations like speeding tickets signal to your insurer that you are a risky driver, as do serious convictions like reckless driving. By driving safely, you can keep yourself safe and your premium low. If you have tickets or at-fault accidents on your driving record already, work on driving carefully from now on, since they will only affect your rate for a few years.

10. Check out local and regional companies.

Large car insurance companies spend billions on advertising every year, but smaller insurers may be able to provide the cheapest premiums in some cases. So, when you're shopping around, make sure to compare quotes from companies of all sizes. You can use WalletHub's cheap car insurance guide as a starting point. Just click on your state to compare the cheapest insurers.

Car insurance premiums are based on drivers' individual risk factors as well as the coverage types and limits they choose. Check out WalletHub's full guide on the factors that affect car insurance rates for more information.

Yes, an insurance policy can be cancelled at any time, and you will receive a partial refund if you paid your premium in advance and then cancel before the end of your policy term. Some car insurance companies also charge a fee for cancelling your policy before the end of the policy term.

There are generally two types of fees car insurance companies charge for cancellation, flat fees and short-rate fees. Flat fees are fixed charges that do not change based on how much of the policy term is left. On the other hand, short-rate fees are a penalty for early cancellation that allow insurance companies to keep more of your premium, above what would be withheld on a pro-rated basis. Short-rate fees get less expensive the further into the policy term you are, and companies use them to recoup cancellation costs. 

Information You Need Before Cancelling Car Insurance 

• Name, address and phone number
• Social Security number
• Date of birth
• Driver's license number
• Car insurance policy number
• Chosen date for cancellation

Before cancelling your existing insurance, be sure that you have a new insurance policy set up to overlap with it so you can avoid a lapse in coverage. Some insurers require 30-days' notice before cancellation, in which case you should wait until this period is up before purchasing a new policy.

If you aren't transitioning to a new insurer and are selling your vehicle, you should wait to cancel until your vehicle has been sold. Your insurance company may require a bill of sale before allowing you to cancel to prove that you won't be driving without insurance.

To learn more, check out WalletHub's guide to cancelling car insurance.

Yes, most car insurance companies have a grace period for late payments. Car insurance grace periods can be up to 30 days, but exactly how much time you have to make a payment before your coverage is canceled depends on your insurance company and state. Some insurers do not offer a grace period to their customers unless the customer is in a state that makes grace periods for late payments mandatory.

An insurance company has to issue a notice of cancellation once you miss your payment's due date. This notice states the final date your provider will accept payment. Paying within the allotted grace period will allow your insurance coverage to continue without a lapse.

Car Insurance Grace Period by Company

Grace periods for some companies are provided by customer service representatives and can vary by state.

Key Things to Know About Car Insurance Grace Periods

• A grace period ensures that your coverage is intact even if you pay your insurance bill late.

• You'll still be covered if you get into an accident during your grace period, but you'll have to make a payment before the end of the grace period.

• If your insurance company doesn't have a grace period or you miss the deadline, you won't have coverage in the event of a car accident.

• If you get into an accident even one day after the grace period ends, you will be personally liable for any property damage or injuries you cause. You won't have coverage for your own injuries or vehicle damage, either.

• Insurance companies typically offer a separate grace period for newly purchased vehicles, extending coverage to the car for 7 to 30 days after you buy it in order to give you time to add the vehicle to your policy.

Paying your premium (or making the necessary adjustments to your coverage arrangements) before the end of your grace period is important because lapses in coverage make you seem like a higher risk for insurance companies and can result in more expensive premiums when you purchase a new policy. You could face legal consequences, too – like fines, license suspensions, and even jail time – if you're caught driving without insurance.

Finally, most major insurers allow you to pay your premium in full up front or enroll in autopay to help you avoid missing due dates for your car insurance payments. Some companies even offer discounts for paying up front or enrolling in autopay.

Yes, you can switch car insurance after an accident, or any time you choose. You don't have to wait until your policy is up for renewal to switch car insurance companies, and you can even change insurers if you have an open claim.

What Happens If You Switch Insurers After an Accident?

There's no penalty for switching car insurance companies after an accident, in particular, but you may face cancellation fees from your current insurance company for stopping your policy early. You're also less likely to save money switching car insurance companies right after you have an accident, as your rate will include your latest mishap on the road. In other words, you can't switch insurance companies to avoid being held accountable for the accident.

Also, keep in mind that if you cause an accident, the insurance provider you had at the time of the accident will still be responsible for handling the claim, even if you cancel their coverage and switch companies. You can't switch insurance providers after an accident to have a new company manage the claim.

What to Do Before Switching Car Insurance Companies

Switching car insurance providers on the same day you have an accident might be viewed as suspicious by some insurance companies, so it's best to wait at least until the claims process begins before switching. You might even want to wait until the process is complete, so you don't have to deal with two car insurance companies simultaneously.

In addition, if you decide to switch car insurance providers, be sure to have your new policy in place before canceling your old policy. It's better to have an overlap of policies for at least a day than it is to have a gap of even one day between auto insurance policies. A gap in your insurance history will be viewed poorly by insurance companies, and it's against the law to drive without adequate insurance coverage.

It can be cheaper to buy car insurance online than through an agent, if you are willing to do the work of understanding and comparing policies. Using an agent can cost you 5% to 20% extra on a new policy in the first year and 2% to 15% every time you renew, according to numerous sources.

There are two kinds of car insurance agents: independent and captive. Independent agents work for themselves and sell car insurance from multiple companies. Their income comes from sales commissions. You will pay these either directly, as a service fee, or indirectly through higher premiums. According to the Independent Insurance Agents & Brokers of America, Inc., independent agents earn 8% to 15% of a new policy's first year premium and 2% to 15% at renewal.

Captive agents work for a single company, offering only that insurer's products. They earn a salary, usually plus commissions. Their initial commissions range from about 5% to 10% of the value of new auto policies that they sell, plus a small percentage at each renewal. This cost is included in your premiums.

Commission costs tend to be higher for independent agents than captive agents. However, an independent agent can comparison shop among multiple insurers to find the best price for the coverage you need. Sometimes, this may be worth the higher commission.

Direct comparison shopping online, with no agent and no commissions, is the cheapest way to buy car insurance. But it takes time and research. As a good rule of thumb, you should get 3-5 quotes. Plus, you'll need to understand the coverage in detail to compare quotes accurately. Look closely at insurance types, protection levels, deductibles, coverage limitations, discounts and any special services. Also read reviews of the companies you're considering to learn from the experiences of other consumers.

If you only want state minimum insurance, buying directly online is probably your cheapest and best method. If your needs are more complex, decide whether getting expert help is worth the extra cost.

You should have liability-only insurance if the annual cost of full coverage exceeds 10% of your car's value. At that point, the extra coverage might not be worth the added cost of paying for more than liability-only insurance. But this is just a general rule of thumb, and the decision to switch to liability-only insurance depends on state coverage requirements and each driver's financial situation.

When Liability-Only Insurance Is Worth It

The main advantage of liability-only insurance is that you'll save on your premium. Since liability insurance offers minimal protection for the policyholder, it is less expensive than full coverage insurance.

However, if your car is damaged by an accident that you cause or another damage-causing event, then you'll have to pay for the repairs out of pocket. If you have the financial means to pay for repairing or replacing your car, and your state doesn't require you to have any other types of insurance, then you could take the risk of switching to liability-only insurance. 

Liability-Only Insurance & State Coverage Requirements

Liability only insurance pays for other people's property damage and injuries resulting from accidents that you cause. Almost every state requires that drivers carry a certain amount of liability insurance.

Some states also require drivers to carry other types of insurance, including uninsured/underinsured motorist coverage and personal injury protection (PIP). If your state requires you to have multiple types of coverage, then you cannot legally drive with liability-only insurance.

Liability-Only Insurance vs. Full Coverage

If your state allows it, then you'll need to decide whether to purchase liability-only insurance or full coverage. Full coverage insurance generally refers to a policy that includes both collision and comprehensive coverage. Collision insurance covers damage to your vehicle after an accident. Comprehensive coverage, on the other hand, pays to repair or replace your car if it's damaged by something other than an accident, like vandalism or a natural disaster.

If your car is leased or financed, you will likely be required to carry full coverage insurance. Even if your car is paid off, you shouldn't purchase liability-only insurance if your vehicle is still worth a lot or you're not in the financial position to pay to repair or replace it. Liability-only insurance could also be risky if you live a high-traffic area where your vehicle is more likely to be damaged.

It can cost anywhere from $0 up to $50 to cancel insurance, and some insurers charge up to 10% of any unused premiums for cancelled policies. Some insurance companies such as Geico or State Farm will not charge a cancellation fee for their customers when they cancel their insurance policies. Other companies such as Liberty Mutual or Travelers don't specifically disclose how much their cancellation fees can be, however they acknowledge that they charge a cancellation fee that can vary based on factors such as the amount of time left on your policy and the type of policy you have with them.

You can cancel your insurance by contacting your insurance company. Some insurance companies will require written notice in order to begin the cancellation process, so make sure you contact a representative in your area or your company's customer service team for any details on their specific cancellation process.

Yes, you can cancel your car insurance at any time, regardless of if you pay monthly or have already paid in advance. Most insurance companies will refund you the months left on your insurance that you have not used or refund a part of the sum you paid depending on if there are cancellation fees.

When cancelling your insurance, make sure you contact the insurance company directly or discuss with your local agent what the cancellation process entails. Some insurance companies will require written notice in order to begin the cancellation process. You'll also need to have your policy number handy and the details of your new policy if you're planning to switch insurers.