How to Switch Car Insurance Companies, and Save Money

A photo to accompany a story about switching car insurance companies Adobe Stock

NextAdvisor is not a licensed insurance company, agency or broker and we do not sell, solicit or negotiate insurance. Our content provides summaries of insurance providers and/or products that may not include all terms, benefits or limitations of such provider or product. Please consult a licensed insurer or producer regarding any insurance product. Our site may include links that take you to another website and result in us earning a fee. However, our compensation is never tied to whether you purchase an insurance product. For more information, please see our Advertising Disclosure and How We Make Money.

Here’s an easy money hack: Consider switching car insurance providers every once in a while. 

While it may be tempting to sit tight with your current auto insurer for years, you might be spending more on your auto insurance policy than you need to. One of the oldest and surest ways to see if you’re overpaying for auto insurance is to shop around and compare rates at least once a year, experts say. 

“If you’re only going to save $5 a month, it’s probably not worth switching insurance companies. But if we’re talking $20 a month, that’s about $250 a year or more, and you’ll want to look into that,” says Jason Newell, managing insurance broker at 303 Insurance Brokers in Denver, Colorado. 

You can switch car insurance providers at any time, and companies generally don’t penalize you for it. Insurers commonly claim you’ll save 10% to 20% by switching, which would represent savings of roughly $165 to $335 per year, based on the average annual cost of auto insurance. Not every driver can save that much just for switching, as some insurers promise, but many do find significant discounts. For example, USAA claims its customers saved over $700 on their annual premium when they switched.

Switching from one auto insurer to another is a pretty simple process. Follow these steps to do it seamlessly. 

1. Research and Compare Auto Insurers

You’ll need to do some research before you make a switch. Start by getting auto insurance quotes from at least three to five companies. When you’re plugging your information in to get the quotes, make sure to enter the same coverage types, limits, and deductibles to your current policy to have an accurate comparison. The only exception to that is if your needs have changed and you’re looking for completely different auto coverage.

Once you have a few quotes, you can compare them to your present auto insurance rate to see if you’re overpaying for the same coverage amount. You can also opt to work with an independent insurance agent who can do that work for you. 

Price matters, but don’t brush off other factors like customer complaints and coverage options when picking your auto insurer. You might end up with a lower rate, but you don’t want to find yourself switching companies again in a few months because of bad customer service or a frustrating claims experience. 

“You want to find that intersection: a strong company that’s offering a competitive rate,” says Newell. 

Also, it never hurts to keep your eye out for perks that could pay off later. For example, you can get a 22% discount from GEICO if you don’t get into an accident for five years.

2. Decide if the Time is Right

You don’t have to wait until your auto policy expires to switch car insurance companies. Here are some instances that could make you curious about how to switch car insurance.

  • Your driving habits have changed: Where you drive, the distance you drive, and where you park your car all impact your insurance premiums. If your driving habits have changed significantly in the last year, it could be worth talking to a few insurance companies to see if you can get a lower rate. 
  • You’re adding a car or driver: You can typically get a discount when you add a new driver or car to your policy or bundle policies. If you can get a bigger discount with another insurer, it may be worth the switch. 
  • You’ve experienced a major life change: You should also consider switching after life milestones such as turning 25 years old, buying a home, or getting married. These life events affect your auto rates and can even help drop them in some instances.
  • Your policy is due for renewal soon: Do some research a month or two before your policy is up for renewal to see if there are better rates out there. 

3. Talk to Your Current Auto Insurer

Talk to your auto insurer before you commit to switching and let them know you’re looking for a better deal. Your auto insurance company doesn’t want to lose your business, so you can see if it’s willing to match or beat rival car insurance quotes. That would also be the perfect time to find out if you’re eligible for any additional discounts with your current insurer.

If they’re not willing to work with you, ask about their cancellation process. Every insurance company has its own way of handling policy cancellations, and it could require some paperwork, such as a signed cancellation notice. It’s important to proactively cancel your old one or your former insurer may continue to bill you.

4. Ask About Cancellation Fees and Refunds

Ask your insurance company upfront about any fees or possible refunds. Most major insurers allow you to cancel your auto policy for free at any time, but some charge a fee if you cancel in the middle of your policy term. 

“You want to find out if there’s going to be any cancellation fees. A lot of companies don’t charge one, but some companies will charge a $50 cancellation fee,” says Megan Shepherd, an insurance analyst at finder.com, a comparison website. “In other cases, it could be 10% of your remaining premiums.”

For example, Esurance says it may charge either 10% of your remaining premium balance or a flat fee between $30–$50 if you cancel before your policy expires.

Insurance companies typically refund any unused auto premium with no fuss before your policy runs out. Say you paid for an annual policy but decide to switch after six months — your insurer should reimburse you for the remaining six months of coverage (minus a possible cancellation fee).

5. Avoid a Lapse in Coverage

You’ll want to be extra careful to avoid a lapse in auto coverage. Insurers will charge higher rates to customers if they’ve gone a period of time without auto coverage. But you can maneuver around this by setting your new policy to begin the same day your old one officially ends.

“Insurance is normally going to start at 12:01 am on the day that the policy starts. You want to make sure you have your new policy enforced the same day, so you don’t have an unintentional lapse of insurance. Even a 24-hour lapse in insurance can have some drastically negative effects,” says Newell.

Frequently Asked Questions

Can I switch car insurance while I have an open claim?

You can switch car insurance while you have an open claim, but you might not want to. Your current insurer will continue to handle the open claim, but the new insurance company will likely see a recent accident or open claim when it pulls your driving history to price you and might give you a higher rate because of it.

Do I need to let my leasing company or lender know about switching auto insurers?

If you have an auto loan or lease your car, you’ll want to notify your lender or leasing company that you’re switching to another insurance company to avoid any confusion. If the lender thinks you aren’t meeting its requirements for auto insurance, it may force an insurance policy that you don’t need and charge you for it. Once you have a new policy in force, ask your insurance company to send proof of insurance to the lender or leasing company.