Will Switching Car Insurance Companies Give You a Better Deal?

Will Switching Car Insurance Companies Give You a Better Deal?
Vehicles drive in traffic on the 405 freeway in Los Angeles, Calif., on Aug. 25, 2022. (Photo by Patrick T. Fallon/AFP via Getty Images)
Mike Valles

Car insurance rates have changed considerably during the pandemic. It has made many drivers uncomfortable with their current car insurance company, causing them to switch insurers for a better price.

One company, CarInsurance, reported that from 2020 to 2023, so far, the average cost of car insurance premiums had increased by 14 percent. In the year 2019, there was only a 1 percent average increase. The states with the highest cost of car insurance premiums are Michigan, Florida, and Rhode Island.

One possible cause for the sudden increase in the cost of premiums is that car prices—new and used—have also increased. Before the pandemic, car prices had risen by only 2.6 percent, but during the pandemic to 2023, those prices increased by 27.1 percent.

Since car insurance companies are on the hook if you get in an accident with a more valuable car, you can expect a car insurance price increase. The good news is that car insurance rates are competitive, and you may get a better deal with another insurance company that will let you save money.

Checking Around for Better Insurance Rates

Before you drop your current policy, you should check around and get multiple car insurance quotes online. Every car insurance company is different, so it would pay to get several quotes before settling on a company. MarketWatch advises that you consider the following about each company before switching:
  • better service or coverage
  • a better track record—not all auto insurance companies have a good payout record
  • more discounts
  • a lower price for good coverage
You may also want to change policies if you need to add new people to your policy. Rates for adding a new teen driver will vary, but some companies will charge much more than others.
Bankrate says that if you have an unsettled claim with your present insurer, it is unlikely that you will be able to switch insurance companies until the issue is settled.

Car Insurance Rates and Your Credit Score

If you stop paying your car insurance bills, the debt could be given to a collection agency. When that happens, Chase says the collection agency might report it to a credit bureau. Only then will it affect your credit score. If it does go to your credit report, it could stay there for seven to 10 years.
When buying auto insurance, the insurance company will check your credit score. They do this to determine what your rate will be. InsuranceOpedia says they will look for canceled policies because of non-payment and outstanding debt. They want to know how likely you are to pay your bills.
The best car insurance rates will go to those with the best credit scores. The best way to raise your credit score is to always pay your bills on time and keep your debt below 30 percent of your total amount of credit. MarketWatch mentions that improving your credit score can mean better rates—except in three states: Hawaii, California, and Massachusetts.

What You May Lose by Switching

If you have more than one policy with an insurance company, such as car, home, motorcycle, and boat insurance, your current company may be giving you a considerable discount. You may already have multiple discounts if you have been with that company for several years. If you switch, you will likely lose the benefit.
Although there is usually no fee for canceling a car insurance policy, NerdWallet says you may be charged a cancellation fee. It is rare, but you may want to know before changing companies.
Another reason why you may want to stay with your current insurer might be because of loyalty programs. Some auto insurance companies have loyalty programs that give special discounts to people that have been with them for several years and still have a good track record.

Making Changes to Your Policy

Before you switch car insurance, talk to your insurer to see if there are ways to lower your bill. The first way to do this is to find out if there are any discounts you may qualify for that you do not have yet. Forbes reveals that many companies will give discounts for:
  • safety equipment (airbags, anti-lock brakes, daytime running lights)
  • new car discount (10–15 percent)
  • anti-theft devices (5–25 percent discount)
  • parking in a garage
  • taking approved defensive driving courses (5–10 percent)
  • good driver discount—no accidents or tickets (10–40 percent)
  • driving less than 12,000 miles per year
  • having multiple policies with the same company (8–25 percent)
  • pay a year’s premium in full (6–14 percent)
  • good student discount (8–25 percent)
  • and more
Be aware that even if you think you qualify for many discounts, an insurance company may have a cap on discounts. It means that what looks like cheap car insurance at first, there may be a discount cap of 15 percent of your bill, so you will not know what the final cost will be until you talk to an agent and they run some numbers for you and give you a car insurance estimate.
Some discounts require you to be with the same company for a couple of years or more before you get them. Being a senior with a good driving record may be another discount.

How to Switch Car Insurance Companies

Even though you can switch car insurance companies as often as you want, being able to compare what you have with what you could get is important. Do not cancel the old policy until you can get another one on the same day because it can mean losing your driver’s license or repossessing your car if you are making payments or leasing it. You can call the old insurer to cancel, and they may offer a further discount to keep your business. A pro-rated refund may also be available if you are canceling before the policy runs out.

Finding a new car insurance company can help you save money if you do it right and investigate beforehand. Be careful of reducing your coverage below your state’s requirements. It is always better to have a little more than the minimum. Also, having full coverage helps you get money from the insurer if you have an accident and must get another car.

The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
Mike Valles has been a freelance writer for many years and focuses on personal finance articles. He writes articles and blog posts for companies and lenders of all sizes and seeks to provide quality information that is up-to-date and easy to understand.
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