Auto insurance is a legal requirement in most states, so paying for your coverage may feel like an obligation, similar to a tax or utility payment. Many drivers set up their policy and renew it year after year without much thought or consulting an agent to review changes. However, with average car insurance rates increasing by over 11% in 2024, according to J.D. Power, numerous drivers are considering switching carriers and shopping for a new policy. If you’re ready to find the best policy for your liability needs and budget, changing companies might be easier than you think.
Why it’s beneficial to shop around for new car insurance
The loyalty discounts provided by your insurer during renewal may actually be costing you money. These discounts rarely offset the annual premium increases. Additionally, if your carrier utilizes controversial price optimization models to set premiums, along with advanced algorithms due to the rise of AI, your loyalty could lead to higher charges.
Price optimization involves using personal, non-driving data like brand loyalty, shopping habits, and magazine subscriptions to calculate the highest possible premium you can be charged while still remaining loyal to your carrier. In essence, this model predicts how likely you are to switch carriers, optimizing pricing for the insurer, not the customer. This is one reason among many to shop around at least once a year. Other scenarios that may warrant a new auto insurance policy include:
1. New drivers: Whether you’re combining insurance policies after marriage or adding a new driver with a learner’s permit, obtaining quotes from various carriers can help you secure the best terms for your new coverage needs.
2. New vehicles: If you’ve recently acquired a new car, a used vehicle, or a specialty vehicle like a motorcycle, RV, or mobile home, exploring different options can prevent overpaying for coverage changes.
3. Major life changes: Changes such as a shorter commute, retirement, reduced annual mileage, or relocating to a different state or ZIP code can influence your driving habits and premium calculations.
4. Bad claims experience: If you’ve encountered difficulties with a claim payout or customer service, seeking a carrier with better customer support based on online reviews might be necessary.
5. Improved credit: In states where car insurers are allowed to use credit-based insurance scores, a better financial standing and improved credit score could lead to lower premiums when comparing insurance quotes.
When considering switching to a new car insurance provider, keep in mind that you could be missing out on significant savings by sticking with your current carrier. Here’s a step-by-step guide on how to shop for a new policy and ensure you’re getting the best rates for your required coverage:
Step 1: Review and evaluate your current auto policy. Begin by retrieving your current policy information…
Review your current auto insurance policy either online or from your records. Understanding your current coverage options can assist you in evaluating what you are paying for and any necessary changes for the future to secure the best quote for the protection suitable for your lifestyle and driving habits. Check for any potential cancellation fees or penalties if you decide to switch carriers. If you are early in your current policy, your insurer might charge a cancellation fee of up to $50.
Step #2: Compare new car insurance quotes
Utilize the internet to easily compare new policies without the need to contact an agent. Enter your ZIP code into an automated quote tool, provide personal information, vehicle details, current insurer, and required coverage. Receive a list of car insurance providers and personalized quotes to compare. Before committing to a new insurer, read online customer reviews for unbiased insights, paying attention to local reviewers for relevant feedback on customer service and claims processes.
Step #3: Apply for your new car insurance policy
If comparing quotes online, you can typically sign up for a new policy online. Provide personal information, vehicle details, and driving habits. If working with an agent, apply over the phone or in person.
Step #4: Notify auto lenders and current insurer
Inform your auto lender of the change in insurance policies if you are still financing a vehicle on the new policy. Notify your old insurance carrier of the cancellation, even if your new insurer offers to handle it for you. Inquire about a potential prorated refund from your previous payment.
Step #5: Obtain proof of insurance
Many insurance carriers offer temporary proof of insurance online or via email that you can print and use until you receive permanent insurance cards. If not automatically provided, request this proof for immediate use if needed during the transition period.
Dig Deeper: Car insurance myths, common mistakes to avoid
Educate yourself on common car insurance myths and mistakes to avoid when switching carriers to ensure a smooth transition. Be aware of your state’s minimum insurance requirements and take advantage of available discounts before finalizing a new policy.
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Take advantage of discounts or special deductions to save money on your auto insurance. Some options to inquire about include pay-in-full or autopay discounts, military or professional membership discounts, discounts for anti-theft or vehicle safety features, and defensive driving discounts. Be mindful of any gaps in policy dates to avoid paying for two policies during the transition period. Ensure the effective date of your new policy aligns just after the cancellation or renewal date of your old policy.
Avoid settling for less coverage than you need. Verify that a quote offering significant savings includes all the necessary coverage. Review your current policy’s liability, comprehensive, and collision coverage details as a reference to ensure you have the full coverage you desire.
Dive deeper: Learn about surprising situations your car insurance may not cover and how to stay protected.
Personal experience: Discover how shopping around helped me save with my current insurer. I had been with the same auto insurance company since I obtained my license at 18, initially under my parents’ policy and later on my own. While the carrier had provided good service when needed, premiums increased annually, despite loyalty discounts from my agent. During a financial review, I explored other options and received quotes from three insurers. Two offered to reduce my monthly premiums by half for the same coverage as my current policy.
While I could have switched to a new policy, I valued my current agent and used the quotes to negotiate a lower rate with my current carrier. This approach succeeded, and my next bill will be half of what I previously paid without compromising coverage. Shopping around can lead to savings, even if you prefer staying with your current insurance company.
Other tips to save on car insurance:
– Bundle policies: Many insurers provide discounts for bundling auto, homeowners, or renters policies.
– Pay biannually: Save up to 15% by paying six months of premiums upfront.
– Take a defensive driving course: Earn a discount of 3% to 10% on your premium for up to three years.
– Enroll in a low-mileage or use-based insurance program: Reduce costs by driving less and participating in telematics programs.
– Improve your credit score: Boosting your credit can lead to savings in states where insurers consider credit scores for premiums.
– Limit insurance claims: Consider the repair costs in relation to your deductible to decide if filing a claim is beneficial.
Consider paying for damages without involving your insurance carrier to avoid a potential increase in rates. Claims can impact your record for three to five years, leading to higher premiums even for minor incidents. Additionally, you can reduce your monthly premiums by raising your deductible from $500 to $1,000. However, ensure you have adequate savings in an emergency fund to cover the higher deductible in case you need to file a claim.
Want to save on car insurance as a senior or mature driver? Explore smart strategies and tips for budgeting, saving money, and maximizing discounts. Learn more about topics such as guest driver coverage, telematics insurance, shopping timing, full-coverage policies, defensive driving discounts, common insurance myths, and FAQs about coverage and protection.
Concerned about how switching insurance policies affects your credit score? Insurance companies conduct soft credit checks and do not report policy changes to credit bureaus. If you are considering insuring only one driver for a single vehicle, check with your carrier first, as it might be more cost-effective to insure both drivers.
Curious about whether your auto insurance covers guest drivers? Most policies extend coverage to individuals who occasionally borrow your car with your permission, known as “permissive use.” However, there are important limitations to consider, especially for longer borrowing periods.
Wondering why drivers under 25 face higher insurance rates? Insurance companies typically charge more for this age group due to statistical data showing a higher risk of accidents and claims, attributed to factors like inexperience and risky driving behaviors.
Moving to a new state? You may not need to change your insurance policy if you are relocating within the same coverage area of your current provider. However, rates can vary by location, so it’s wise to compare quotes from different insurers to ensure you get the best premium. Lastly, the color of your car does not impact your insurance rates, despite the common misconception.
When it comes to car insurance, it’s important to consider your driving history, mileage, and the specific make and model of your vehicle. In our guide to debunking common car insurance myths, we address misconceptions about factors that truly matter, rather than focusing on superficial details like the color of your car.
One common question many drivers have is whether there are circumstances where it makes sense to drop full-coverage car insurance. While full coverage can offer enhanced financial protection and peace of mind for most individuals, there are scenarios where it might be excessive, especially if you drive a car with low value or if you own your vehicle outright. To help you determine if liability, comprehensive, and collision coverage are appropriate for your situation and budget, check out our detailed examination of full-coverage car insurance.
Sources:
– J.D. Power. “Trust Emerges as Top Driver of Customer Satisfaction with Auto Insurance as Prices Continue to Surge.” Retrieved from J.D. Power on February 3, 2025.
– NPR. “Being A Loyal Auto Insurance Customer Can Cost You.” Retrieved from NPR on February 3, 2025.
About the author:
Heather Petty is a finance writer with expertise in consumer and business banking, personal and home lending, debt management, and saving strategies. Heather’s mission is to empower others to navigate their finances wisely after facing challenges with a dishonest mortgage broker during her own home purchase. Her financial insights have been featured on MSN, Nasdaq, Credit.com, and Finder, among other reputable platforms. When she’s not demystifying financial concepts, Heather is an acclaimed young adult mystery author with an internationally recognized series under her belt.
Edited by Kelly Suzan Waggoner.
