If you have a car, you need insurance. But purchasing an insurance policy is not a “one and done” situation. As your car gets older, you may add new drivers to your policy, your driving habits change, and you may not need as much coverage as your car’s actual cash value depreciates. As such, you may consider switching your insurance to a new provider that better meets your needs.
But when is it a good time to shop? When is it worth switching, and what does this mean for your old insurance policy?
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When Is a Good Time to Shop for a New Auto Insurance Policy?
When it comes to auto insurance, there is no specific day or month to get a great deal.
In practice, a good time to shop for new auto insurance is when your current policy is not working for you and your family anymore and you are looking for alternatives. Many policies are either 6 or 12 months long, and insurers typically notify policyholders of upcoming premium changes before the term expires. This is a good time to go auto insurance shopping because you can easily compare and contrast other offers and see how they stack up when you know what your current insurer plans to charge for renewal.
It is worth noting that you can also consider telling your current provider that you are shopping around because some may offer discounts as encouragement for you to stay.
When Is it Worth Switching Auto Insurance?
While the end of your current insurance policy is one reason to switch, there are several other factors that may make the move worth it. Here are some situations to consider:
Changes in Age
Driving history helps lower insurance rates. Typically, the longer you have been driving, the lower your insurance premiums tend to be. Teenage and young adult drivers generally pay more, and rates steadily lower through your 20s, 30s, and 40s.
If you find that your premiums are not lowering as expected as you have gotten more experienced behind the wheel, it is worth shopping around to see what other providers can offer based on your driving history.
Changes in Credit Score
Auto insurance is a state responsibility and many states permit the use of credit scores to inform insurance rates, according to the National Association of Insurance Commissioners (NAIC). Evaluate new insurance providers if you have significantly improved your credit score through substantial debt payments or consolidation.
Changes in Driving Record
Along with your driving history, your driving record also impacts your auto insurance rates. Your driving record includes traffic violations such as speeding tickets in addition to accidents that cause property or personal damage. Insurers typically look at incidents from the past 3 to 5 years.
Every state has its own rules about how your driving record can affect insurance rates. For example, premiums in Massachusetts are subject to a surcharge if the insured driver is more than 50% at fault, the accident involves a claim of more than $1,000, or the claim is payment for damage to someone else’s property or vehicle.
If your driving history has been clean for the past 3 to 5 years, it may be an opportunistic time to shop for a new policy.
Changes in Life Circumstances
Substantive changes in your life circumstance may also make it worth shopping for new auto insurance. For example, if you have recently gotten married, insurers may offer you lower rates for a joint policy. Likewise, if you have just started renting your first apartment or purchased your first home, the financial stability associated with these activities could lead to lower rates.
Do You Need to Wait for Your Existing Policy to Expire?
You do not have to wait for your existing policy to expire before shopping for a new one. Many car insurance companies permit you to cancel your policy on demand and without penalty. Some may assess a one-time fee or a cost that’s based on the remainder of your policy term.
If you want to cancel your current policy, speak to your insurer directly. Some may ask for a verbal declaration that you want to terminate your insurance as of a specific date, and some may request the declaration in writing. Be sure to request documentation that states when your insurance was cancelled for your own records.
When Is the Right Time to Cancel Your Old Insurance?
Be sure that your new insurance is active before you cancel your old insurance.
Here’s why: If your new insurance policy starts on February 2nd and your current policy expires on February 1st, there is one day where you may not be covered. While that might not seem like a big deal, it can become a big problem if you get pulled over for speeding or get in an accident that day. If that happens, you may not be covered by either insurance company, meaning you are in violation of the law and are on the hook for the costs of any damages or injuries caused. In addition, your new insurance company may choose to cancel your new policy or increase your total premiums as a result.
Put simply, cancel your old insurance once you have your new insurance card either in hand or digitally.
Making Your Move
If your current auto insurance policy no longer meets your needs, your credit score has recently improved, or you’ve experienced a significant life change, it is worth considering a new policy. While there is no “perfect” time to shop for car insurance, consider comparing quotes once you have renewal rates from your current provider so you can see what’s out there and how it compares to your existing coverage.