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Switching Car Insurance Companies − When Can You Cancel?

When car insurers raise rates, or worse yet, take customers for granted, many savvy consumers will consider switching car insurance companies.

The numbers bear that out.

According to J.D. Power, when U.S. auto insurers hiked rates by an average of 2.1 percent in 2014, 39 percent of insurance customers “shopped for a better deal.” That was up from 32 percent who shopped around in 2013.

A separate 2015 study by The Texas Office of Public Insurance Counsel (OPIC), reported that Lone Star State consumers, with the same auto insurance company for eight years, could slash their auto insurance premiums by 19 percent by switching car insurance companies.

Clearly, there is both incentive and money to be made by switching car insurance companies – the question is, when can you cancel your old policy and start a new one?

RELATED: 5 Best Apps and Devices to Monitor Teen Drivers

Fundamentally, there are a few obvious strategies to take. For example, the best time to switch is about one month before your policy renewal date. That enables you to qualify for discounts and deals from new insurers, and encourages your current insurer to match or exceed any deals from competitors.

Also, watch for early cancellation fees (some auto insurers include them in your policy’s fine print), and never cancel a current policy before getting a new one (even a one day gap in insurance coverage can leave you vulnerable if you’re in an accident, or if your state mandates continuous coverage.)

Past that, the process if switching car insurance companies can be daunting if you’re not prepared.

That’s what happened to James Concannon, an author and federal procurement instructor who sought to switch his car insurer after five years.

“I did so because my insurance company assured me that my price would go lower if I did not have an accident, but when it happened, my rates went up,” he says.

Concannon launched his search by using an online quote system.

“To be sure I wasn’t making a mistake, I gave my old company a chance to beat the quote, and they could not,” he adds. “Consequently, I think I used a good system to make a good decision. “

When to switch your car insurance companies

If you’re in Concannon shoes, what’s your best move when switching car insurance companies?

The consensus advice from auto insurance specialists is to plan ahead, know when you can canel and review all of your options before pulling any trigger.

“First, review your insurance every year,” says Stacy Molinari, a personal line manager at Insurance Marketing Services, near Boston. “Study any changes that may impact rates, such as a newly licensed operator or sur-chargeable incident.”

Also, meet with a trusted insurance agent and discuss any changes in driving habits, Molinari states.

“Some carriers rate based on miles driven so it is important to know how this is impacting your rate and if there is a carrier that is more competitive,” she says. “Some carriers better serve inexperienced drivers and drivers with points on their license.”

CHECK OUT: Costs to Insure Teen Drivers Drop

Price is never the best reason for switching car insurance companies, Molinari notes. 

“It’s more important to review the carrier, claims service history and coverage offerings,” she offers. “In addition, make sure your new agent will handle cancelling the prior policy on your behalf, to make sure the coverage transfer is seamless. A soft credit score may be required depending on the state you reside in, as well.”

D.J. Noland, an insurance agent at McGhee Insurance Agency, Inc., in North Little Rock Arkansas, advises policy-changers to switch carriers, or at least consider doing so, after three years as a client.

“That’s because as insurance metrics evolve, the old rates are retired and new ones are brought on and the insurance company does not tell existing clients about this switch,” Noland says. “You may even qualify for better rates under their newer plans, so ask your current insurance company for an update. Then, compare that against quotes from other insurance companies.”

Like Molinari, Noland says price should never be the only motivator when switching car insurance companies.

“Insurance agents and insurance companies may reduce your coverage to the absolute bare minimums and/or put in a lesser policy to get your business,” he says. “Verify the coverage you want is there first, then if the price is motivating, definitely make the move.

Once you’ve paid your money and received confirmation in writing that your new policy is set to go on the date you requested, contact your current insurance company and request to cancel the same date the new policy starts.

“You can always future effective date a cancel request,” Noland adds.

Switching car insurance companies after major life event

Brian McCollum, founder of  McCollum Insurance Agency, in suburban Philadelphia offers auto insurance consumers another timely tip – look into switching car insurance companies after a major life event, like a marriage, a home move, or when a teenager gets his or her drivers license.

“When you do make the switch, talk to an independent agent, who represents several companies,” McCollum says. “That’s because an independent agent can provide a client with more than one option.

Also, if you work with a professional agent, they will handle the transition to make sure there is no gap in coverage,” he adds. “They’ll also handle communication with the prior insurance company, along with contact to your lienholder or mortgage company,” McCollum says.

If you’re unhappy with your auto insurer, either for price, lousy customer service, or any other reason, the key is to be prepared, do your homework, and be ready to pounce when a good deal pops up.

After all, nobody ever said an auto insurance policy was a long-term commitment, and from time to time, it’s a good idea to let your auto insurance company know that.

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