Switching Car Insurance: When To Do It & Ways To Save
TV commercials for car insurance promise big savings if you switch providers, but it’s important to put these claims into perspective. When you think about it, most people are only going to change policies if doing so will definitely save them money. Proving that your average customer saved 15% or so therefore isn’t so tough, after all.
With that being said, competition between insurance companies does breed saving potential, so even if you shopped carefully last time around, you may be able to get a better deal – especially if your financial circumstances have changed.
Switching to a new insurer is a pretty simple process, and you can do it at any time. You don’t have to wait for your current policy to expire before changing insurance companies.
You’ll start by evaluating your needs, and then comparison shopping for the best rates. Once your new policy is in place, be sure to cancel the old policy so that you don’t get billed for late payments for insurance you’re no longer using.
To make sure you get the best deal, continue reading for guidelines and tips for car insurance shoppers.
When To Switch Your Car Insurance
We recommend checking for better car insurance deals annually. But, at a minimum, you should do so when you have a change in circumstances, such as the examples below:
- Marital Status – Married drivers almost always pay less for car insurance than single drivers. Make sure to notify your insurance about your nuptials so that your rates can be adjusted. But also check to see if another insurer will offer a greater discount.
- Home ownership – Your status as a homeowner rather than a renter can also affect your premiums. Owning a home also presents an opportunity to benefit from a home and car discount on both policies.
- New Drivers – You’re probably prepared to pay more as teenaged children get their drivers’ licenses. Shop around before simply accepting the new rate from your current insurer.
- Education & Employment – Earning a college degree will lower your rates with some insurers more than others. Also getting a new job with a shorter commute may offer some savings.
- New Wheels – The best insurer for your old jalopy might not be the best for a shiny new car. Insurers will look at various models and features differently.
- Driving Record Updates – Get a copy of your driving record and your CLUE Report, and make sure you know how old your traffic violations and insurance claims are. Some insurance companies will look back at only three years of your driving history, while others will evaluate a longer period. So when violations or claims reach the three-year milestone, it’s a good time to shop for a better price on insurance.
- Credit Score Improvement – Your credit score can be a major factor in car-insurance pricing. If it has improved, let your current insurer know and find out how other companies will react, as well.
- Evolution Of Your Needs – Financing a new car or finally paying it off may change your insurance needs. You may also reevaluate your policies and their limits and deductibles. Read our guides to full coverage and types of insurance to see if more or less coverage may be right for you.
- Age & Experience – Remember that when a driver reaches various age thresholds beginning at 25, you’ll be eligible for lower rates. Similarly when a new adult driver has been driving for five years or more, lower rates will generally be available.
How Much You Can Save By Switching
The average annual insurance premium paid in the U.S. in 2012 was $503.88 for liability only and $814.99 overall according to the National Association of Insurance Commissioners. Insurers commonly claim you’ll save 10 - 20% for switching, and that represents a savings of at least $50 to $160 a year.
However, some companies suggest much more savings may be possible:
|GEICO famously claims 15 minutes could save you 15 percent or more on car insurance.|
|Allstate has claimed an average savings of $400 a year, $473 if switching from GEICO.|
|21st Century Insurance claims $474 a year in savings.|
|State Farm claims potentially more than $500 in savings.|
|Progressive suggests that new customers may save an average of $550.|
No one insurer will have the best rates for everyone, so not every shopper will save by switching to any one particular company. But saving money by switching is real; it’s just a matter of finding the car insurance company that’s the best match for you.
Tips For Making The Switch
It’s a simple thing to switch, but following a plan will help you get the best deal and avoid any extras hassles with your state’s DMV.
When Shopping For New Insurance:
- Get the most coverage you can afford – Getting the minimum coverage required by law will keep you out of trouble with the law, but it may not adequately protect you and your assets after an accident.
- Comparison shop – Make sure to get at least three quotes. Comparison tools like the WalletHub car insurance quote generator make it easy to quickly weigh a wide range of options.
- Don’t overlook discounts – A wide range of discounts might be available to you. We have helpful tips in the WalletHub guide to car insurance discounts.
- Evaluate customer service – Online forums, such as the ratings and reviews on WalletHub, can help you benefit from the experience of other consumers. Your state insurance commission may also be a great resource. Click here to look up your state’s insurance commission page.
- Be Honest On Applications – Insurance companies have access to your driving and insurance claims history through your state DMV and databases like the LexisNexis CLUE Report, so it doesn’t pay to fib about accidents or tickets. If you’ve given misleading information or withheld important information, your insurer is likely to find out and may increase your rates or drop you.
- See If Your Current Insurer Can Match The Best Available Deal – Your current insurance company may be willing to match or surpass the best offer you find from a competing company, so it never hurts to contact them before switching – especially if you’re already happy with their customer service.
When You’re Ready To Make the Switch:
- Avoid a lapse of even a day – Some states will find out quickly if you’ve gone without insurance. Hold off on canceling your previous policy until your new one comes into effect.
- Proactively cancel your old policy – Don’t simply stop paying. Officially cancel your coverage or they will consider your account in default. If you pay with automatic bill pay watch your bank statement to make sure the withdrawals stop.
- Get your refund – If you’ve prepaid for your current term you’re entitled to a prorated refund of the unused portion. You may be charged a cancellation fee.
- Switch proof of insurance – Remember to carry your new insurance card. Understand your states laws for proof of insurance and follow them.
Image: kurhan / Shutterstock and Robyn Mackenzie / Shutterstock
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