Switching Sides: A Guide to Changing Car Insurance Companies

Questions Answered

• How does switching car insurance providers affect my insurance costs?

• I’m moving out of state. Do I need to find a new car insurance provider?

• How do I go about switching carriers?

A car insurance provider switch isn’t quite as easy as, say, switching lanes while driving or switching on the breaker after accidentally plugging too many things into one outlet. If you’re wanting to replace your insurance carrier, you should know there’s a right way and a wrong way to do it. And, as you might expect, the right way takes a little longer — but it will definitely save you some headaches later on.

Why switch car insurance providers?  

The first consideration when you start thinking about switching car insurance providers is whether you really need to make the change. It’s usually not wise to change carriers solely because you want different coverages or you don’t like your agent, for example. You’re better off changing coverages or switching agents as needed. Canceling your coverage and initiating a new policy puts you at risk of a coverage gap which can raise your premiums in the future. You also will lose any loyalty discounts you’ve earned with your current carrier.  

So, what are some good reasons to switch carriers? Here are three.

1. You are moving out of your insurer’s service area.

Car insurance providers are licensed by the state. Many of the big names operate in all or most of the U.S. states, but there are also regional carriers that only operate in portions of the U.S. Infinity, for example, only insures drivers in Texas, Georgia, Florida, Arizona, and California. If you have an Infinity policy today and you move to Colorado, you have no choice but to find a new carrier.

If you are insured through a nationwide provider like GEICO or State Farm, you should be able to stay with the same carrier — though you may have to switch agents.

2. You want to switch to cheaper car insurance premiums.

Each carrier has its own underwriting and pricing policies, which is why premiums can vary so much from one provider to the next. Sometimes, switching carriers can save you hundreds of dollars annually — and that would be a good reason to make the move.

3. You want better customer service.

Sadly, some insurance companies just aren’t very good at the customer service end of the business. You rely on your car insurance provider to be there for you during life’s more stressful moments — like buying a car or recovering after a collision. In those times, you need calm, not combative, guidance. If every interaction you have with an insurance representative or claims adjuster is unpleasant, you’re justified in wanting to switch.

How can a switch affect the cost of your car insurance?  

Moving to a new carrier can affect the cost of your insurance, both immediately and over time. Negative effects include the loss of loyalty discounts with your current carrier, the risk of a coverage gap, and the possibility of incurring cancellation fees. These may be worth it, though, if you qualify for a substantially lower rate with your new carrier.

1. You lose loyalty discounts.

Insurance carriers commonly offer a loyalty discount, which is a small break on the premiums every time you renew. If you stay with the same carrier for five years or more, that loyalty discount can make your current coverage more affordable than nearly anything else out there. The danger in walking away from that discount is that you can’t get it back.

Say you find a cheaper rate than what you are paying today, and you decide to switch. After you move to the new carrier, you realize the new situation isn’t right for you — may be the customer service is poor or you don’t like the online tools available to manage your policy. Try and return to your old carrier and you probably won’t qualify for the same rate you had before. The reason is that you stopped the coverage temporarily and lost your loyalty discounts.

2. If you have a coverage gap, your future rates will rise.

Mistime the initiation of your new policy and you may inadvertently add a risk factor to your insurance record. Insurers don’t like to see lapses in coverage, even short ones. They’ll use that lapse as justification for a higher rate. It’s also a financial risk for you to go a single day without coverage on your vehicle. Even if you don’t drive the car without insurance, something could fall on it while it’s parked in your garage. Without coverage in place, you are solely responsible for the resulting repair costs.

3. You may incur penalties for a switch in the middle of a car insurance policy term.

You cannot be charged a cancellation fee for ending your coverage on the last day of your policy term. But, depending on where you live, you could be charged a penalty for canceling coverage in the middle of a policy term.

4. You might qualify for a lower rate with your new carrier.

The most common reason people switch carriers is to lock in a lower insurance premium. If you’ve already found a rate that’ll save you money, congratulations. Make the most of that lower rate by initiating your new coverage on the day your old policy expires. That way, you’ll avoid a lapse in coverage as well as any possible cancellation fees.

Steps on how to switch your car insurance

The time needed: 1 hour. A few things can go wrong when you move from one auto insurance provider to another. For example, you can inadvertently let your coverage lapse or you can accidentally pay premiums on two policies at once. Avoid those problems by following the steps below to make the change.

1. Know the coverages you need

   You may have been quoted a lower rate by a different insurance company already but take the time to clarify what coverage levels you actually need. You need enough liability coverage, for example, to protect your assets, like your savings and your home equity. Your deductibles should be affordable, and you may need optional protections like roadside assistance if you drive a lot. List out your ideal coverages and use those levels to compare new quotes.

2. Comparison shop

   Gather quotes from at least three carriers. You can do this on your own, or work through an independent agent or broker. Note that a broker may charge you a fee, while agents get paid directly from the insurance companies.

3. Research insurers

   With your quotes in hand, do some quick research on the financial strength and customer service profile of each prospective insurance provider. We happen to be a great resource for research ourselves, but you can also check financial strength at Fitch Ratings and customer service ratings at J.D. Power. Additionally, you can do a general search online for reviews on that company. Be leery of sites like Rip Off Report and Pissed Consumer though; these sites tend to attract the most extreme reviewers. You might also ask family and friends if they have experience with any of the insurers you’re considering. It may be anecdotal, but insurers' quality can vary widely from state to state, so having a local recommendation can help.

4. Time the car insurance switch to avoid penalties and lapse in coverage

   Proper timing of the transition from one insurer to the next is key — this is how you’ll avoid cancellation fees and a coverage gap. Plan on initiating your new policy the day before your old one expires. Inform your old insurer that you intend to expire the policy and ask to have any auto-billing turned off.  

5. Initiate the new policy

   To initiate your new policy, you will provide a form of payment, along with any driver or car details that are still outstanding.

6. Cancel the old policy

   It doesn’t hurt to call your old carrier again and confirm that you are letting the policy expire. If you want to cancel the policy in the middle of a term, additionally ask for confirmation that your coverage has been canceled on the right date. You should also get a refund pro-rated refund.

7. Shut off any autopayments to the old carrier

   Log in to your bank account online to shut off any autopayments to your old insurance provider. If you miss this step and a payment gets sent, you can get the money back, but it may take a while to track it down.

8. Print your new ID cards

   Before you drive anywhere, make sure you have access to your new insurance ID cards. Stash a copy in your glovebox or download the carrier’s app to have a digital ID card available at all times.

Eight steps to switch auto insurance providers may seem excessive, but most of them are quick and easy. Plus, the entire process will be well worth your time to avoid fees, accidental overpayments, and other coverage mix-ups.