Switching Auto Insurance While On Loan

You can change your auto insurance at any time, even if you've just renewed your policy. However, it's important to have a new policy in place before cancelling your old one to avoid a lapse in coverage, which could result in a rate increase, license suspension, fines, or repossession of your vehicle. If you're switching insurers, be aware that some companies may charge a cancellation fee.

If you're financing your vehicle, your lender may require you to have a certain level of insurance coverage, such as comprehensive and collision insurance. Therefore, it's important to update your lender if you switch insurance providers or make changes to your coverage.

Cancelling your old insurance policy

Understanding Your Policy

Firstly, review your current auto insurance policy. Check the terms and conditions to familiarise yourself with the cancellation procedure. Different insurance providers may have specific requirements, such as written notification via letter or email. Knowing these details will make the cancellation process smoother.

Timing is Important

If you've just purchased your insurance policy and have changed your mind, you're in luck. By law, you have a minimum 14-day cooling-off period during which you can cancel without incurring additional fees. This period starts from when the policy begins or when you receive your policy documents, whichever is later. Cancelling during this window will likely result in a refund of any premiums paid, minus a small amount for the days the policy was active, and possibly a small administration fee.

However, if you're cancelling after the cooling-off period, you may be charged cancellation or administration fees. These fees can vary, so check your policy carefully. If you paid for your policy upfront, your refund will be calculated on a pro-rata basis, minus any applicable charges. If you pay monthly, you may not receive a refund and might even have to pay extra to cover the period you've been insured, along with cancellation and administration fees.

Contact Your Insurance Provider

Get in touch with your insurance provider to inform them of your intention to cancel. If possible, try to have this conversation over the phone and follow it up in writing via email or letter. Make sure to note the time, date, and the name of the person you spoke to. This documentation will be useful if any disputes arise later.

Avoid a Coverage Gap

It's crucial to ensure you have continuous car insurance coverage. Set the start date of your new policy to be the same day your old policy officially ends to avoid any lapses. Many insurers offer discounts for maintaining continuous coverage, even if you switch companies.

Update Your Leasing Company or Lender

If you have a car loan or lease, inform your lender or leasing company about the switch. They may have specific insurance requirements, such as comprehensive and collision insurance, and they'll want to ensure the vehicle remains covered. Ask your new insurer to send proof of insurance to them.

Final Thoughts

While switching auto insurance policies, remember that you can do this at any time. You're not bound to wait until the end of your policy period. Additionally, don't forget to update your car insurance ID cards with your new provider's details. This ensures you have proof of insurance when needed.

Avoiding a coverage gap

When changing car insurance companies, it is important to avoid a coverage gap. This is when there is a lapse in coverage between the cancellation of your old policy and the start of your new one.

Insurers charge significantly higher rates after a lapse in coverage, so it is important to make sure you have car insurance at all times. One way to do this is to set your new policy to begin on the same day your old one ends. Many insurers offer a discount for having continuous coverage, even if you are switching companies. To qualify for this discount, some insurers require you to sign up for a new policy seven days before your current policy ends.

If you have a car loan or lease, you may be required by your lender to have a certain amount of insurance coverage, including comprehensive and collision insurance. Because the lender has a financial stake in your car, they will want to make sure the vehicle is covered by insurance. Therefore, it is important to update them with any changes to your insurance. Ask your new insurer to send proof of insurance to your lender as well as to you.

Changing your ID cards

When you switch insurance providers, your new insurer will send you two copies of your new insurance ID card. One copy should be kept in your vehicle, and the other should be kept in a safe place in case you need to provide proof of insurance, such as when registering a vehicle at the DMV.

You can choose to store your insurance ID card electronically on your smartphone, which is allowed in most states. This can be more convenient and eco-friendly, as you won't have to worry about losing the physical card. However, if you opt for electronic storage, make sure you remember to print the cards if you prefer to have physical copies.

Remember to replace your old insurance ID cards with the new ones to avoid confusion and ensure you have the correct information readily available.

Notifying your leasing company or lender

When it comes to notifying your leasing company or lender about changes to your auto insurance, there are a few key steps to keep in mind. Firstly, it is essential to understand that leasing companies and lenders have specific insurance requirements that you must meet. These requirements are usually outlined in your lease or loan agreement, so be sure to review those documents carefully.

• Understand the insurance requirements: Leasing companies typically require full-coverage insurance, which includes comprehensive and collision coverage. They may also mandate higher liability limits than the state minimums. Lenders, on the other hand, may require you to maintain full coverage until the loan is paid off. Make sure you are aware of the specific requirements of your leasing company or lender.
• Review your current insurance policy: Compare your current insurance policy against the requirements of the leasing company or lender. Pay close attention to the types of coverage, limits, and deductibles specified in your lease or loan agreement.
• Identify any changes or adjustments: If your current insurance policy does not meet the requirements, you will need to make changes. This may involve adding or removing certain coverages, adjusting liability limits, or changing deductibles. Be sure to consult with your insurance agent to understand the implications of any changes.
• Contact your insurance company: Once you have determined the necessary adjustments, reach out to your insurance company to update your policy. Provide them with the details of the leasing company or lender's requirements and request that they send proof of the updated insurance to the relevant parties.
• Inform the leasing company or lender: While your insurance company may automatically notify the leasing company or lender of the changes, it is always a good idea to confirm this. Contact the leasing company or lender and let them know about the updated insurance policy. Provide them with the effective date of the changes and any relevant documentation.
• Maintain open communication: Keep all parties informed of any future adjustments to your insurance policy. If you plan to make changes to your coverage, limits, or deductibles, be sure to notify both your insurance company and the leasing company or lender in a timely manner.

Remember, it is crucial to maintain the required level of insurance coverage as specified by your leasing company or lender. Failure to do so could result in penalties, additional fees, or even repossession of the vehicle. By following these steps and staying proactive in your communication, you can ensure that you are meeting their requirements and protecting yourself financially.

Adjusting your current policy

Adjusting your current auto insurance policy is a straightforward process and can be done at any time. Here are some steps and tips to help you through the process:

Contact Your Insurer

Get in touch with your insurance provider by calling their customer service number or speaking with your local agent. Many insurers also allow you to make minor adjustments, such as adding or removing vehicles or drivers, through their website or mobile app. It's a good idea to review your policy documents carefully to understand the specific changes you want to make.

Understand the Process and Any Associated Fees

While most insurers don't charge a fee for adjusting your policy, it's important to check with your current insurance company to find out if there are any charges or penalties for making changes. Additionally, be prepared to pay for any resulting increase in your premium upfront.

Know When to Adjust Your Policy

There are several scenarios where adjusting your current policy is a good idea. For example, if you get married, you can often get discounts by insuring both vehicles on the same policy. Similarly, if your teen receives their driver's license, adding them to your existing policy is usually more cost-effective than insuring them separately. Other significant life events, such as relocation or a change in employment status, may also warrant adjustments to your coverage.

Adjust Coverage Limits or Add Optional Coverage

You can typically change your policy coverage limits or add optional coverage at any time during the policy period. However, you cannot decrease your coverage level below the state minimum requirement. If you want to lower your premiums, consider increasing your deductibles, but keep in mind that this means you'll pay more out-of-pocket if you need to file a claim.

Remove or Add Drivers

It's important to keep your insurer informed about who has access to your vehicle. Make sure to add or remove drivers from your policy as needed. This includes anyone who regularly uses your car, such as your spouse, children, or roommates. If a guest uses your car occasionally, you may not need to add them, but it's best to check with your insurance provider to be sure.

Adjust Your Policy After a Major Purchase

If you buy a new vehicle, you'll need to add it to your policy. Most insurers provide temporary coverage for a new car, but you should still notify them within the specified timeframe, usually around 30 days. Similarly, if you sell your car, remember to remove it from your policy and cancel the coverage to avoid unnecessary expenses.

Stay Informed About Policy Changes

Keep yourself updated about any changes in your personal information, such as your address or marital status, and inform your insurer accordingly. These factors can impact your insurance rates, so it's essential to keep your policy up-to-date.

Frequently asked questions