Owing One Company, Insuring With Another

Yes, you can get auto insurance even if you owe money to another company. However, it is important to notify your current insurance provider and cancel your policy to avoid unpaid payments, which can damage your credit score and lead to higher insurance premiums. You can then switch to a new insurance provider. It is still in your best interest to pay off any outstanding debt as soon as possible to protect your credit rating and keep your premiums as low as possible.

You can switch insurance companies while owing money

Yes, you can switch insurance companies while owing money. However, it is important to handle the transition properly to avoid negative consequences, such as a lapse in coverage or damage to your credit score. Here are some steps to guide you through the process:

Pay off your outstanding balance:

If possible, pay off the amount you owe to your previous insurance company. This will help you maintain a good credit score and avoid issues with your new insurer. Remember, insurance is usually paid in advance, so you will owe money for the period your previous policy was active.

Notify your previous insurer:

Let your previous insurance company know that you are cancelling your policy and switching to a new provider. This is a crucial step to avoid being billed for late payments and to ensure a smooth transition.

Avoid a lapse in coverage:

Make sure there is no gap between the end of your old policy and the start of your new one. Even a single day without coverage can lead to negative consequences, such as driving without insurance, which is illegal. Contact your old insurer to get a statement in writing confirming the date your old policy will end, and schedule your new policy to begin on the same day.

Research and compare new insurance companies:

Take the time to research and compare different insurance companies to find the best fit for your needs and budget. Consider factors such as coverage options, discounts, customer service, and financial strength. Get quotes from at least three companies, making sure to compare the same coverage types and limits for an accurate assessment.

Purchase your new policy:

Once you have found a suitable new insurer, purchase your new policy. Remember to include your lender or lessor on the new policy if you have a loan on your vehicle.

Cancel your previous policy:

Contact your previous insurance company to officially cancel your old policy. Follow their specific process for cancellation, which may include signing a form or speaking to a customer service representative.

Access your new insurance ID cards:

Once the transition is complete, make sure to obtain your new insurance ID cards, which may be physical or digital, depending on your state and insurer. Keep these cards with you or in your vehicle at all times as proof of coverage.

Remember, you can switch insurance companies at any time, but certain events may warrant the switch sooner. For example, if you've moved, added a new driver or vehicle, or experienced a significant life change, it may be a good time to explore new insurance options.

Notify your current provider when you switch

It is important to notify your current insurance provider when you switch to a new insurer. This is because you don't want to be paying for two policies at the same time, and you want to ensure there is no gap in your coverage.

Firstly, you should contact your agent or current insurance company to notify them that you are terminating your policy. This will prevent them from billing you for future coverage. If you signed up for automatic payments, you will need to log in to your online account and cancel the auto-withdrawals. If you used your bank's bill pay service, be sure to stop the payments with your bank. It's also a good idea to ask your agent or carrier to confirm the termination in writing.

Each insurance company has its own process for cancelling policies. You may need to sign a form authorising the cancellation, or you may need to call and speak directly with a company customer service representative. Your insurance agent can help you through the process.

It is also important to avoid a lapse in coverage. Ask for a statement in writing from your old company that includes the date the policy will end. Your new insurer should be able to begin your coverage on a date of your choosing, as long as you give them enough time to activate it.

Once you have officially cancelled your old policy, you will likely want to switch out your old insurance ID card for an updated one to keep in your vehicle or wallet. Your new carrier will likely send you a physical copy, but many car insurance companies now also issue digital ID cards via email.

Pay off outstanding bills to avoid a poor credit score

If you owe an insurance company money, it's important to pay off the outstanding balance as soon as possible. While it is possible to switch insurance providers even if you owe money to your current one, failing to pay your bills can result in a poor credit score, which will negatively impact your insurance rates.

A poor credit score can lead to insurance rate increases of nearly $500 a year. In addition, insurance companies check credit reports when writing new policies, so a default on your credit report may cost you more in the future through higher premiums. A good credit score, on the other hand, will help you obtain credit or investment and make it easier to get credit from a wider selection of lenders. You'll also have access to more competitive interest rates and repayment terms.

To maintain a good credit score, it's crucial to pay all your bills on time, including loan repayments, credit cards, rent or mortgage payments, utilities, phone and broadband bills, and other business rates. It's also important to establish positive relationships with your suppliers and to monitor your credit score regularly.

By paying off your outstanding bills, you can avoid the negative consequences of a poor credit score and keep your insurance rates low.

Shop around for a new insurance company

Shopping around for a new insurance company is a great way to find the best rates and coverage for your needs. Here are some tips to help you through the process:

Gather the Necessary Information

First, gather all the information you'll need to get accurate quotes. This includes personal information such as your name, date of birth, address, driver's license number, and driving history. You'll also need vehicle information like the make, model, year, Vehicle Identification Number (VIN), safety features, and mileage. If you have existing insurance, gather details about your current coverage and insurance company.

Determine Your Coverage Needs

It's important to know what type and amount of coverage you need before shopping around. Review your current policy and decide if you need to make any changes. Consider your state's minimum insurance requirements, the value of your assets, and any other relevant factors. You can use online tools and guides to help you determine the appropriate coverage levels.

Choose Your Shopping Method

There are several ways to shop for insurance, including using an insurer's agent, an independent agent, insurance company websites, or online comparison platforms. Captive agents work for a single insurance company and can guide you through their specific coverage options. Independent agents work with multiple companies and can help you compare premiums. Insurance company websites allow you to purchase policies directly, but you'll need to understand your coverage needs. Online comparison platforms, like The Zebra, are a great way to find the cheapest prices by comparing rates from different companies.

Compare Insurance Providers and Inquire About Discounts

Get quotes from at least three insurance providers, ensuring that you're comparing the same types and amounts of coverage. Inquire about any available discounts, such as those for bundling policies, installing anti-theft devices, having a good credit score, or taking a defensive driving course. You can also raise your deductible or pay your premium in full to lower your rates.

Purchase Your New Insurance Policy

Once you've chosen a new insurance provider, purchase your policy by paying the down payment or premium and setting up a payment plan. Remember to cancel your old policy and ensure there is no lapse in coverage between policies. Your old insurer should issue a refund for any unused premium.

Pay off old premium debt to protect your credit rating

If you have outstanding debts, it's always best to pay them off as soon as possible. This is because old debts can negatively impact your credit score and, in turn, your ability to get the best rates on insurance premiums.

Unpaid debts and delinquent accounts can remain on your credit report for up to seven years. A low credit score can increase your insurance premiums by as much as 127%.

If you are unable to pay off your debts, there are still options available to you. You could, for example, contact a non-profit credit counsellor to help you find the best path forward.

If you are unable to pay off your debts to a previous insurer, you may still be able to switch to a new insurer. However, it is important to notify your current insurance provider and cancel your policy to avoid being billed for late payments. Failure to do so could result in your account being sent to a debt collection agency, which would further damage your credit score.

Frequently asked questions