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When It Doesn’t Make Sense to Switch Car Insurance

The Simple Dollar logo The Simple Dollar 1/25/2021 Julian Dossett
a man driving a car: A woman driving her vehicle wearing latex gloves and a mask during the COVID-19 pandemic. © Provided by The Simple Dollar A woman driving her vehicle wearing latex gloves and a mask during the COVID-19 pandemic.

People often switch auto insurance providers to help save some money on the cost of their policies. While moving to a new insurance provider can help you shave a few bucks off your monthly premium, switching car insurance isn’t always the best idea.

Many insurers offer valuable incentives to keep their customers, and you might need to have your policy in place for a while before these incentives kick in. Moving to a new carrier can mean losing those incentives, and timing can also work against you.

A lapse in coverage could end up costing you more than what you’d save with the new provider. Insurance shoppers should be sure to look before leaping to ensure they make the wise choice for their insurance policies — and their pocketbooks.

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When does it make sense to stay with the same insurer? 

Car insurance providers love advertising new incentives to attract customers, and there are plenty of times when a lower rate makes switching over worth the effort. Still, it never hurts to think twice before canceling your current policy.

Walking through the benefits of sticking with your car insurer is good practice to make sure you have the policy that best fits your needs. Here are a few things to consider.

If you had a recent accident

You can still switch to a new provider, even if you’re in the middle of settling a claim with your insurer. You might consider waiting, though. Switching over while you’re trying to figure out a claim means you’ll be dealing with two insurance companies at the same time. Plus, if the accident results in a higher premium for you, the new company will charge the higher rate right away. By comparison, that new rate might not affect your current premium until it’s up for renewal.

[ More: What Is the Minimum Car Insurance Required in Each State? ]

Loyalty and bundle discounts

Discounts are an important part of keeping your insurance premium as low as possible. Many insurers offer lower premiums to policyholders who stick around and use the insurer for multiple policies. For example, GEICO offers a multi-vehicle discount of up to 25%. Taking out an insurance policy with a new company means you lose your current discounts, which could mean your policy will cost more.

Accident forgiveness

After an accident, your premium usually goes up. One of the more valuable perks offered with car insurance policies is accident forgiveness. For example, Liberty Mutual allows you to keep your premium the same after your first accident if you’ve been accident-free for five years prior. It’s smart to make sure you won’t lose this perk if you switch over to a new provider.

Cancellation fees

When you sign up for a car insurance policy the contract lasts for a specific term, which is usually six months to a year. If you cancel early, you could get hit with an early cancellation fee. For example, State Farm might charge you a fee for canceling your policy early. Make sure you understand the fees that come with early cancellation. The fee could eat up the money you’d save on monthly premiums by switching over before the renewal date comes up.

[ Next: Understanding Auto Insurance Quotes ]

Can I switch car insurance before the renewal date?

A common question policyholders ask is: “Can I change car insurance before the renewal date?” Rest assured that even if the renewal date on your policy is months away, you can still cancel your car insurance.

The main benefit of canceling your insurance early is usually getting a better deal on your monthly premium from a different provider. It’s also possible your current provider has mismanaged your policy, which would also be a fair reason to switch before your renewal date. But keep in mind that doing so might cost more than it’s worth.

A couple of things to consider include:

  • Lapse in coverage — If you plan to switch car insurance before your current policy’s renewal date, make sure the new policy begins immediately or even a few days before the old one ends. If you drive without insurance, it’s considered a lapse in coverage. This can stay on your record, and some car insurers may charge more for drivers who’ve experienced this lapse.
  • Cancellations fees — Car insurance policies come in set terms. If you want to cancel your policy before the term ends, many providers require an early cancellation fee. The best practice is to check the policy details whenever you sign up with a new car insurance provider, so you already know what the penalty will be if you decide to cancel your policy early.

Tips for determining if it’s in your best interest to switch car insurance

There are times when it’s best to leave your current car insurance provider behind for a new one. Let’s walk through a few of the situations when you might want to sign up for a new policy and cancel your old insurance, even if the renewal date is still in the future.

These include:

  • Marriage: Married drivers are less likely to file car insurance claims than those who are single, so providers generally provide lower premiums to people who are married. If you’re planning to tie the knot, shop around to see which provider will offer you the best rate. Doing so could save you money on your monthly premiums.
  • Buying a new car: Some car insurance providers are more willing to insure certain types of cars than others. If you bought a new car and your insurance premium has skyrocketed, it could be beneficial to see what policies are offered by other providers.
  • Adding a teen driver: Teens are known to be risky drivers to insure. If you’re planning on adding a teen to your policy, the premium could jump quite a bit. Some car insurance companies, such as Allstate, offer teen driver discounts, which could offset the extra cost of insuring a teen driver.
  • Adding more vehicles to a policy: You should try to get a multi-vehicle discount any time you want to ensure multiple vehicles under a single policy. These discounts are common and offered by many different carriers. It’s smart to check and see if a different car insurer has a better discount available.
  • Negative experience with the provider: Most car insurers strive to keep their policyholders happy, but anyone can experience a negative interaction with their provider, especially if you need to file a claim. If your current provider dropped the ball, you might need to look elsewhere for your insurance needs.

Too long, didn’t read?

New incentives and promotions can make it seem attractive to change car insurers, but knowing when to switch car insurance isn’t always straightforward. If early cancellation will cost you a lot in fees, or if you’ll lose a valuable discount when you change providers, then sticking with your current provider might be the best bet.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

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