Is It Bad to Switch Car Insurance Companies?

By Jennifer Brozic 06/29/2021 4:00pm

While you probably don’t want to switch car insurance companies every couple of months, changing insurers now and then isn’t a problem. And it might save you some money.

What is Car Insurance?

Without car insurance, you might have to shell out thousands of dollars after an accident, theft, vandalism, or weather event that damages your car. Insurance can help cover medical bills, property damage, lost wages, funeral expenses, and lawsuits that result from a covered event.

But there are different types of coverage to choose from, and the amount of protection your policy provides depends on the coverages and policy limits you select.

Most Common Types of Car Insurance

Nearly every state in the country, except New Hampshire, requires drivers to maintain a minimum amount of liability insurance, which kicks in if you’re responsible for injuring someone else or damaging their property with your car. But it doesn’t cover injuries you or your passengers sustain or damage to your vehicle. For that, you need other types of coverage, which might include:

Collision. Pays for damage to your vehicle if you’re in a crash.
Comprehensive. Covers theft, vandalism, certain weather-related events, and run-ins with wild animals.
Medical Payments/PIP. Helps pay for medical expenses you or your passengers incur.
Uninsured/Underinsured motorist. Helps cover accident-related injuries and vehicle damage if you’re hit by an uninsured/underinsured or hit-and-run driver.

Depending on where you live, some of the coverages listed above may be mandatory, but in many states, they’re optional. However, if you skip them, you could be putting yourself at risk of racking up significant out-of-pocket expenses.

There are also some other optional coverages you may want to consider that can help reduce your out-of-pocket costs, including rental car reimbursement, GAP insurance, and towing and labor. Coverages vary by insurer, so be sure to ask.

Negatives of Canceling a Policy

Even if you have a good reason for switching car insurance companies, you need to weigh the benefits and drawbacks before you do. For example, if you leave your current insurer, you may have to pay a cancellation fee. And you could lose loyalty and multi-policy discounts.

How to Cancel an Old Policy

Canceling an insurance policy is relatively simple, but it’s important that you have a new policy in place before you cancel the old one. Otherwise, you may have a lapse in coverage. If you’ve already found a new insurance company, call your current insurer and ask about their cancellation policy.

Some companies may let you cancel over the phone, while others may require you to provide notification in writing. After submitting your cancellation request, you should receive a notice letting you know your coverage was terminated.

Can You Even Switch Car Insurance Companies?

Yes. And there are some good reasons you might want to consider changing insurers. Here are a few.

Why You Should Change Auto Insurance

To save money. Underwriting criteria and discounts vary from insurer to insurer, so changing companies could potentially save you hundreds of dollars each year.
You moved. If you moved across town, you could probably keep your existing insurance. But if you move to another state, your current insurer may not offer coverage there.
To bundle. Bundling your auto insurance with other policies may help you save money.
Your needs changed. Insurance needs evolve over time. If your driving habits have changed, you’ve added or removed a driver from your policy, or you need coverage your current company doesn’t offer, it may be time to switch car insurance companies.
To get better service. If it takes your current insurer a week to get back to you via email, or you have to wait on hold for an hour every time you call, you may be able to get better service with a different company.
Your credit improved. If you live in a state where insurers can use credit-based insurance scores to determine premiums, and your credit has improved since you purchased your policy, switching may save you money.
Adding a driver or car. Adding a driver or car to your policy may change your rates significantly. Shopping around can help you get the best deal.

How to Switch Car Insurance Companies: Steps for Success

Switching insurance companies is a big deal. Before you make your decision, it’s a good idea to:

Do your homework. Research the companies you’re considering to find out what coverages and discounts they offer. Consider checking with the Better Business Bureau and online review sites like Trustpilot to find out how many complaints a company has and what people are saying about it.
Ask for recommendations. Friends and family are usually a good source of referrals for just about anything, including insurance. Find out if they have suggestions of companies they’ve been happy with.
Get multiple quotes. Because pricing can vary widely between companies, it’s a good idea to get quotes from multiple insurers. Just be sure you’re comparing the same coverage and policy limits to get an accurate comparison.
Don’t let your coverage lapse. If your car insurance coverage lapses, you could face a variety of fees and penalties. Be sure you have your new coverage set up before you cancel your existing policy.

How to Know When it’s Time to Switch

The time that’s right for you to switch depends on your circumstances. Many things can indicate it’s time for a change. For example, if you’re adding a vehicle or driver to your policy, you can get a better price elsewhere, or you’re fed up with the customer service, it might be a sign that it’s time to switch car insurance companies.

When Can You Change Carriers?

You don’t have to wait until it’s time to renew your policy. You can switch carriers at any time. But if you filed a claim with your current insurance company that hasn’t been finalized, you might want to wait until it’s resolved. Information related to that claim may affect your new policy.

How to Save Money When Changing Car Insurers

Saving money is one of the biggest reasons to change car insurance companies, and there are many ways you might be able to save with a different insurer.

Discounts. Ask about the discounts the company offers to see how many you qualify for.
Bundle multiple policies. If you have more than one policy with an insurer, you can typically qualify for a discount.
Shop around. The criteria insurers use to determine premiums vary between companies, so it’s worth getting quotes from multiple providers.
Be a safe driver. Many insurance companies offer safe driver discounts to policyholders with clean driving records. If you don’t have a clean driving record, you won’t qualify for the discount. And you might get hit with a surcharge, which is a fee insurance companies often charge drivers with a history of certain violations.
Usage-based. If you don’t drive much, you might want to consider a usage-based policy that lets you pay by the mile.

Switching car insurance companies can help you save money or get the specialized coverage you need. If you decide to switch, make sure you don’t have a lapse in coverage.