Insurance Switch: When To Change?

There are many reasons why you may want to consider changing insurance companies. It could be because you're trying to save money, your family situation has changed, you've bought a home, or you're not happy with your current insurance company.

However, it's important to keep in mind that switching insurance companies can come with some risks. For example, you may end up with a worse policy or have to go through a medical exam again. Additionally, if you have loyalty benefits or a short-rate penalty with your current insurer, switching might not be the best option.

Overall, it's a good idea to review your insurance coverage annually and compare rates from multiple companies to ensure you're getting the best deal.

When you're trying to save money

If you're trying to save money, shopping around for a new auto insurance policy might be a good idea. According to a 2022 study by ValuePenguin, 26% of policyholders save $200 or more a year after moving their coverage to a new provider.

• Shop around for better rates: Compare rates from at least three insurers if you're considering switching car insurance companies. When comparing rates, review and match policy features—such as coverage types, limits, and deductibles—to your current policy. Take your time to find the best car insurance company that offers you the right mix of cheap rates, useful coverage options, and dependable customer service.
• Contact your current car insurance company: After you've found the best rates for insurance, give your current insurance company a call before you commit to switching to the new company. See if your current company will match the quote you got from a competitor and ask about the company's cancellation process and any potential cancellation fees.
• Start your new policy and cancel your old policy: Once you've decided to switch insurance companies, buy your new policy and confirm it's active. Then you can move forward with canceling your old insurance policy. Make sure your new policy starts the same day your old policy expires to avoid fees or legal trouble for having a lapse in coverage.
• Notify your lender: If you have a lease or loan on your car, notify your lender or lease provider immediately after changing insurance companies. Most car leases and loans require you to have car insurance.
• Switch at the right time: While you can switch car insurance companies at any time, that doesn't mean every time is the best time. Be aware that some car insurance companies give discounts based on how long you've had a policy with your provider. So, if you switch companies after a month, you won't be eligible for a loyalty discount. Check with your car insurance company to see if it charges a cancellation fee within a certain time frame. Most companies let you cancel without any fees, but this isn't always the case. You might want to wait until your policy expires to avoid any fees.

When your family situation changes

When it comes to insurance, there are many reasons why people choose to switch providers. One of the most common reasons is that the policyholder feels they are paying too much for their coverage and believe they could get a better deal elsewhere.

If you've recently gotten married, you can add your spouse to your auto insurance policy and potentially receive a discount. Insurers often require that married couples share their car insurance policies if they keep all their cars at the same residence. On the other hand, if you divorce your spouse, you'll both need separate policies, and in most states, divorce can cause your premiums to increase.

If you have a teenager who has started driving, adding them to your policy can be expensive since they are considered inexperienced drivers. Luckily, some insurance providers offer discounts for young drivers. For example, State Farm advertises a good student discount of up to 25% and a Drive Safe & Save app that can save you up to 30% and teach your teenager safe driving.

When you've bought a home

When you've bought a new home, it's a good idea to shop around for insurance. You don't have to stick with your current company, and you can switch at any time. Here are some things to keep in mind when changing insurance companies after buying a new home:

Review your current policy

First, review your current policy to understand your coverage and what it costs. You can find this information on your declarations page, which is usually available through your insurer's online portal. Check for any cancellation fees for early termination, as some companies charge a fee if you cancel before your policy expires.

Determine your coverage needs

Consider your insurance needs at least once a year to ensure you have adequate coverage to protect your new home and family. For instance, if you've expanded or improved your new home, such as by installing a new roof, you may need to increase your coverage limits. Other factors that may impact your coverage needs include buying a car (which may make you eligible for a bundle discount), changes in the number of people in your household, changes to your credit score, adding a security system or safety feature, or an increase in your current insurance rates.

Shop for quotes and compare companies

Get home insurance quotes from several companies (at least five is recommended) to ensure you get the best rate. You'll need to provide specific information about your new home, such as the age of the roof, HVAC system, hot water heater, and plumbing, as well as any renovation details and dates, security system and fire safety information, pet information, and details of past insurance claims.

While finding the best rate is important, it's also crucial to choose a company with great customer service, as you'll want reliable support if you need to make a claim.

Buy a new policy and cancel the old one

Once you've found a suitable policy, buy your new home insurance policy and ensure its effective date lines up with your current policy's cancellation date to avoid a lapse in coverage. Ask about any refunds for unused premiums, especially if you paid your current policy upfront in full.

Inform your mortgage lender

If you have a mortgage, reach out to your lender to let them know about the switch. They will likely want to review the new policy and ensure they are named as a loss payee for claims. If you pay your insurance through an escrow account, your lender will need to know where to send the payment.

Additional considerations

When switching insurance companies, there may be some financial considerations, such as cancellation fees or refund policies from your current insurer. There is also a risk of losing discounts, such as loyalty or bundling discounts, with your current insurer. Additionally, ensure there is no gap in coverage during the transition period to protect your new home and belongings.

When you're unhappy with your insurance company

If you're unhappy with your insurance company, it's a good idea to start shopping around for a new provider. There are a few reasons why you might be unhappy with your current insurance company, and it's worth identifying these so you can be sure to find a better alternative.

For example, you might be unhappy with the level of customer service you're receiving. If your insurance company takes a long time to respond to your queries or investigate your claim, or if they deny your claim without a valid reason, it's probably time to walk away.

You might also be unhappy with the cost of your insurance. Insurance premiums can increase for a number of reasons, including changes in your personal circumstances or your insurance company simply raising their rates. If you're trying to save money, shopping around for a new auto insurance policy might be a good idea.

Other reasons for dissatisfaction with your insurance company could include poor coverage or a lack of benefits and perks, such as free roadside assistance or gap coverage for a new car lease.

Whatever the reason for your unhappiness, it's worth remembering that switching insurance companies won't necessarily solve all your problems. For example, if you're looking for cheaper insurance, you'll need to take into account cancellation fees from your current provider and the possibility of higher premiums due to factors such as your age or tenure with your previous insurer. You might also need to pay for overlapping coverage to avoid a lapse in coverage, which can result in fines and higher insurance rates.

However, if you've decided that switching insurance companies is the right move for you, the process is relatively simple. You'll need to gather several quotes, figure out the cancellation fees, purchase a new policy, and then cancel your current policy. It's recommended to have your new policy in place before cancelling your current one to avoid a lapse in coverage.

When you're driving more or less

If you're driving more or less than you were previously, it may be worth considering changing your insurance company. This is because the number of miles you drive annually is a factor that insurers consider when calculating premiums. If you're adding fewer than 10,000 miles to your odometer each year, for example, you may benefit from a pay-per-mile plan.

It's recommended that you review your insurance coverage annually, regardless of the type of policy you have. You don't need to wait until the renewal period to switch insurance companies – you can do it at any time. However, some insurers may impose a cancellation fee for dropping a policy early.

If you're driving less, you may be able to save money by switching to a pay-per-mile or telematics policy. These policies typically involve installing a device in your car that tracks your driving behaviour, including the number of miles you drive. If you're driving fewer miles, you may be able to get a discount on your insurance.

On the other hand, if you're driving more, your insurance premiums may increase. This is because the more you drive, the greater the risk of being involved in an accident. Insurers may view you as a higher-risk driver and charge you higher premiums as a result.

In addition to reviewing your insurance coverage annually, it's a good idea to compare insurance quotes from multiple companies at least once a year to ensure you're getting competitive rates. You can use an insurance comparison site or get free online quotes from individual companies. By shopping around, you may be able to find a better rate or a policy that better suits your needs.

When considering whether to switch insurance companies, it's important to weigh the risks and benefits. Changing insurance companies can help you find a more suitable plan and save money on your rates. However, there is a risk of losing loyalty benefits, such as accident forgiveness, and you may have to pay a cancellation fee if you end your policy early.

In summary, if you're driving more or less, it's worth reviewing your insurance coverage and comparing quotes from multiple companies to ensure you're getting the best rate and the right type of policy for your needs.

Frequently asked questions