Do's and Don'ts of Switching Auto Insurance?

Answer 1

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You can switch your auto insurance coverage to another company anytime you choose to do so. It doesn't matter whether you've been with your insurer for many years or just signed with a new insurance company a few days ago. However, you have to do it the smart way or it can end up costing you big time if don't do it the right way.

Generally, when you cancel your premium in any period before the policy period lapses, the insurance company will prorate your most recent premium payment up to the date of cancellation. The unused portion will be reimbursed back to you.

First, always make sure you have your new auto policy in place before you cancel the old one. Don't ignore your insurance bill. You might have a time period lapse where you aren't covered at all. You will be considered an uninsured motorist and liable for any fines or penalties imposed by the state in which you live.

Additionally, if you get in an accident during a period where you've cancelled your policy and the new one is not yet in force, you will have bear all the financial costs yourself. You'll be out of luck and in for a major financial headache.

One misconception that some people are under is that they think they have to wait until their current insurance policy is about to lapse before they can switch auto insurers. Not so as you can do it at anytime you choose to switch insurers.

However, some insurance companies may charge you what is called a short rate' cancellation penalty if you terminate the policy before its expiry period. The penalty might negate the financial savings you hoped to enjoy by switching. The best bet is to always ask if your insurance company has a cancellation policy before you buy in case you want to switch companies later on.

Finally, when you cancel your auto insurance policy, don't rely on doing so with a simple phone call. Always cancel your insurance policy in writing. In your letter you should specify the date you want the policy terminated. This is important. If you don't, the insurance company will terminate the policy at the end of the coverage period with the reason that you failed to pay your premium. The result can negatively affect your ability to buy a new policy elsewhere.