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The Art of Switching Car Insurance: 6 Things to Know

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author photo by Russ Heaps March 2017

Inertia is the tendency for an object to continue doing whatever it is it's doing. When it comes to car insurance, most of us suffer from inertia, despite relentless ads promising discounts in the hundreds of dollars if we switch carriers.

Although there are a few triggers that should motivate us to shop around, such as buying a new car or moving to a different city or state, reviewing and comparative shopping car insurance every couple of years is simply smart business. Insurance, like anything else, changes with time. The best coverage and lowest cost for you today may not be the best a year or two down the road.

Let's say you've taken the plunge, done the work and found that better coverage and lower cost with another carrier -- what now? Insurance.com offers six nuts-and-bolts fundamentals when switching car insurance.

1. Easiest Time to Switch

Although a major life change, like buying a new car or getting married, forces us to think about insurance at random times, paying that annual premium to renew current coverage is a natural trigger for some comparative shopping. Containing all the needed information (premium cost, coverage limits, discounts and so forth) to shop apples to apples, the renewal notice should be a call to action.

Depending on the state of residence, that renewal/premium notice should arrive 3 to 4 weeks before the new policy period begins. That provides ample time to shop, compare, apply and buy new coverage before the current policy renews.

2. Insure First

Never cancel the current policy before new coverage is firmly in place. You should never be without coverage, even for a day! Beyond the liability risk of some calamity occurring while uninsured, you also might expose yourself to penalties. Always coordinate the initiation of the new policy with the cancellation of the current one.

3. Opportunity Knocks

Sure, the easiest time to switch carriers may be when the current policy renews, but by law, you can replace that coverage at any time. Life changes, like buying a home with a garage or in a less risky area, are often opportunities for lower premiums. Don't miss the boat. Even if you pay your premium annually, you won't leave money on the table if you switch before the end of the policy period. Your current carrier will calculate a prorated rate up to the cancellation date, returning the difference between that and your most recent premium to you.

4. Look Before You Leap

The siren call of a big money-saving discount may grab your attention, but there may be cost considerations beyond the price of the premium. The cheapest price doesn't always equal the lowest cost. Switching insurance carriers could mean surrendering loyalty discounts with your current carrier, losing discounts on other policies (if you bundle), losing earned accident forgiveness that won't raise your premiums after a claim or a loss of any other benefits based on the length of your relationship with your current carrier.

Also, include any early cancellation penalties in your calculation of cost savings. A few insurance providers have an early cancellation penalty of 10 percent or so. If yours is one of those, it might be cheaper to wait until renewal time to make the switch.

5. Out With the Old

Cancel your current insurance in writing. If you purchased your insurance online, your provider may have a path for canceling online, but it's always best to do it in writing. Provide your name as it appears on the policy, the policy number, your full address, the exact date you want the cancellation to take effect, the reason for cancellation, your new insurance carrier and policy number, your signature and the date. Although it will involve a trip to the post office, send it to your insurance company's customer service address by certified mail, requesting the extra-cost return receipt.

6. Trust, but Verify

Nonpayment of the premium won't cancel your current policy. It will automatically renew even if you don't pay the premium. After some weeks or months, the carrier will cancel for nonpayment but will charge you for the cost of coverage before it was canceled. Be proactive. If you don't receive written confirmation of cancellation before the renewal date, contact the company's customer service and verify the policy is canceled.

What it means to you: Switching car insurance is your right. Doing it the right way can save you more than money; it can save you some hassle.

This image is a stock photo and is not an exact representation of any vehicle offered for sale. Advertised vehicles of this model may have styling, trim levels, colors and optional equipment that differ from the stock photo.
The Art of Switching Car Insurance: 6 Things to Know - Autotrader