How to Switch Your Car Insurance in 6 Steps

Switching car insurance companies might be a good idea if you can lower your rates significantly or get better coverage for your dollar.

Janet Berry-Johnson
Janet Berry-Johnson
  • 8+ years writing about insurance, taxes, and personal finance

  • Certified public accountant

Janet applies her experience in personal finance, taxes, and accounting to make complex financial topics accessible. Her byline has appeared on numerous web media.

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Ashley Cox
Edited byAshley Cox
Headshot of Managing Editor Ashley Cox
Ashley CoxSenior Managing Editor
  • 7+ years in content creation and management

  • 5+ years in insurance and personal finance content

Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.

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Updated February 27, 2024

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Switching car insurance might not always be high on your list of priorities, but there are some compelling reasons to consider a switch. Perhaps you’re seeking a lower rate, more comprehensive coverage, or better customer service. Or maybe you’ve moved to a new state and your needs have changed.

Whatever the reason, it’s important to shop around. Comparing car insurance quotes from multiple companies ensures you get the coverage you need at a cheaper rate.

If you want to know how to switch car insurance, these six steps will guide you from initial consideration to the final transaction.

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Step 1: Decide what coverage you need

The first step is to nail down what type of coverage you actually need. Car insurance isn’t a one-size-fits-all situation — you need to customize it to fit your needs and risk tolerance.

Consider the following when deciding on your coverage amount:

  • Coverage limits: Liability insurance is mandatory in nearly every state.[1] But it only covers injuries and damages to the other driver if you’re at fault in an accident; it won’t cover your injuries or damages to your vehicle.

  • Coverage types: Beyond liability, you have several optional coverages to consider, including collision insurance, comprehensive insurance, full glass coverage, and rental reimbursement.

  • Unique coverage needs: You may have specific needs, such as rideshare coverage for driving for Uber or Lyft or gap insurance to protect you in case your financed vehicle is stolen or totaled in an accident.

  • Deductibles: A higher collision or comprehensive deductible can lower your premium, but make sure it’s an amount you can afford if you file a claim.[2]

If you’re unsure what coverages are right for you, you can speak with an insurance agent. They can provide personalized advice based on your specific situation.

Step 2: Check for potential cancellation penalties

The next step is to examine your current policy for any potential cancellation penalties.

Car insurance policies are normally pretty flexible, allowing policyholders to cancel their coverage at any time. But this doesn’t always mean you can walk away without incurring some costs.

While many insurance companies offer prorated refunds if you’ve paid your premium in advance, some may charge a flat cancellation fee or calculate your refund on a “short-rate” basis. “Short rate” means the insurance company keeps more of your premium to cover the administrative cost of writing a policy that doesn’t run its full term. Be sure to read your insurance policy details, looking for sections that discuss termination.

Keep in Mind

If you discover you’ll owe a cancellation fee or receive a short-rated refund, weigh this cost against the potential savings and benefits of switching to a new insurance company. Sometimes, it might be better to wait until your current policy is up for renewal.

Step 3: Shop around for quotes from multiple insurers

The next step is to shop around for quotes from several different insurance companies. Here are some reasons why you shouldn’t just go with the first company that fits your budget:

  • Cost savings: Car insurance rates can vary greatly from one company to another, even for the same coverages. By shopping around, you can find the most competitive rates, potentially saving hundreds of dollars annually.

  • Coverage options: Different insurance companies offer varying coverage options, endorsements, and discounts. Comparing quotes allows you to find a policy that provides the coverage enhancements and benefits that are most important to you.

  • Customer service and satisfaction: The quality of service from an insurance company is just as important as the cost and coverage. Reading reviews and checking ratings from the Better Business Bureau can help you gauge their customer service and claims handling.

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Step 4: Purchase a new policy and avoid a lapse in coverage

After evaluating your options, choose the quote with the best combination of price, coverage, and service for your needs. Before finalizing your purchase, review the quote details carefully to ensure they match your expectations. Pay special attention to the coverage limits, deductibles, and any exclusions or conditions.

You can usually purchase a policy online, over the phone, or in person if the company has local agents. Be prepared to provide detailed information about yourself, your vehicle, and your driving history.

Coordinate the start date of your new policy to ensure it begins before your current policy expires. This is crucial to avoid a lapse in coverage and potential penalties or suspensions from your state.

You’ll typically need to make the first month’s premium payment to activate the policy. Most insurance companies offer monthly installments, but paying in full could come with a discount.

Step 5: Cancel your previous insurance policy

Once your new car insurance policy is in effect, the next step is to formally cancel your previous policy. This is generally a straightforward process, but the method can depend on the insurance company. You can typically cancel over the phone or by visiting your local agent’s office.

Some companies may allow you to cancel your coverage online or through the mobile app. In any case, you may need to put the request in writing or electronically sign a cancellation request form.

Important Information

If you’ve paid your premium in advance, you may be entitled to a refund for the unused portion of your premium. Ask how and when you can expect the refund, and follow up to make sure you get it. It’s also a good idea to get written confirmation of your policy’s cancellation, including the effective date.

Step 6: Swap your insurance ID cards

The final step in switching your car insurance is to swap out your old insurance ID cards for the new ones. Ensuring you have the right insurance ID cards in your vehicle isn’t just a matter of organization — it’s a legal requirement in most states.

Once you purchase your new policy, the insurance company should provide you with new ID cards. It may make digital ID cards available through its website or mobile app or through email, and you can print them out. Your insurer might also mail a physical copy, but that could take a few days to arrive, so a printed option is best if you need proof of insurance immediately.

To protect your personal information, be sure to shred or dispose of your old ID cards securely.

When you should switch insurers

Here are several scenarios where switching car insurance companies might be a smart move:

  • You’ve moved. Relocating to a new area can affect your insurance premiums due to changes in risk factors, such as crime rates, traffic patterns, and weather conditions.[3]

  • Your premiums have increased. If your current car insurance company just sent you a rate increase without any changes to your driving record, it might be a good time to look for better rates elsewhere.

  • You need to add a new car or driver. Major changes to your policy, like adding a new car or a teen driver, can be an ideal time to compare offers from different insurance companies to ensure you’re getting the best deal.

  • Your circumstances have changed. Certain life changes, such as buying a new home, getting married, improving your credit score, or changing jobs, can alter your insurance needs or allow you to qualify for new discounts.

  • You’re unhappy with your current insurer. If you’re dissatisfied with your current insurer’s customer service or claim handling, switching to a company with a better reputation for customer satisfaction can improve your peace of mind.

Switching car insurance FAQs

Here’s some additional information to help you navigate the process of switching car insurance.

  • Do you need to cancel your car insurance before switching insurers?

    No. You shouldn’t cancel your current car insurance policy before securing a new one. To avoid any lapse in insurance coverage, ensure your new policy is active before formally canceling the old one.

  • Can you switch auto insurance companies at any time?

    Yes, you can switch auto insurance companies at any time. But it’s important to check if there are any cancellation fees or penalties associated with your current policy. Ideally, you should time the switch to coincide with the renewal date.

  • Will your car insurance company refund the premiums you already paid?

    If you paid your premium in advance and cancel your policy before it expires, most insurance companies will refund the unused portion of your premium. But some insurers may charge a cancellation fee or “short rate” your refund. This means your refund could be smaller than anticipated.

  • Can you switch companies if you have a vehicle loan?

    Yes, you can switch insurance companies even if you have a vehicle loan. You’ll need to inform your lender about the change and ensure your new policy meets its requirements, typically including comprehensive and collision coverage.

  • Can you switch insurers if you have an open claim?

    While you technically can switch insurers if you have an open claim, it’s generally a good idea to wait until the claim is settled. Switching while trying to settle a claim can complicate the process.

Sources

  1. Insurance Information Institute. "Is it legal to drive without insurance?."
  2. Insurance Information Institute. "Understanding your insurance deductibles."
  3. Insurance Information Institute. "What determines the price of an auto insurance policy?."
Janet Berry-Johnson
Janet Berry-Johnson

Janet Berry-Johnson, CPA is a freelance writer with a background in accounting and income tax planning and preparation. She's passionate about making complicated financial topics accessible to readers. She lives in Omaha, Nebraska with her husband and son and their rescue dog, Dexter. Visit her website at www.jberryjohnson.com.

Ashley Cox
Edited byAshley CoxSenior Managing Editor
Headshot of Managing Editor Ashley Cox
Ashley CoxSenior Managing Editor
  • 7+ years in content creation and management

  • 5+ years in insurance and personal finance content

Ashley is a seasoned personal finance editor who’s produced a variety of digital content, including insurance, credit cards, mortgages, and consumer lending products.

Featured in

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