Cars in a parking lot
You?ve shopped around and found a good insurance rate ? now what? Here are a few easy steps to follow and things you should know before making the switch:
Choosing a New Insurance Company
The first step to changing insurance companies is to select a new company and policy. Start by obtaining quotes from a variety of companies. When you request quotes, make sure that you are getting the quote based on the same coverage options and levels; this will ensure that you are comparing rates fairly. InsuranceHotline.com will compare your car insurance rate against over 30 insurance companies and save you the hassle of calling around to various insurance providers.
Cancelling the Old Policy
When cancelling your old insurance policy, it is best to do so in writing even if your insurance company doesn?t require it. This ensures that you have record of the date of the requested cancellation so that there is no confusion as to when you want the old policy to terminate.
Before you cancel, be certain that the new insurance policy is in place. The last thing you want is to cancel your old policy and then find out that either the new policy is not active yet or that the rate that you were quoted is not the premium you are receiving. This would leave you scrambling to either find a new policy or stuck with a higher rate than you expected.
Your old policy can sometimes be cancelled retroactively, if you started a new policy but did not cancel the old one right away. You will need to ask your insurance company what their policy is on retroactive cancellations. In most cases, you will need to provide a copy of the proof of insurance on the new policy showing the in-force date.
Prorating, Short-Rating and Avoiding Penalties
When you cancel your policy mid-term, your insurance company may either prorate or short-rate the refund that you receive. In a prorated situation, you will be refunded the total amount of the premium for the coverage you did not use. This means that if you had a twelve month policy but cancelled after nine months, you would receive three months worth of premium refunded to you.
In some cases the insurance company may refund based on what is known as a short-rate. This is when the insurance company would take a penalty out of your refund for early cancellation. It?s best to find out which system your insurance company will use prior to cancelling.
In some cases, the savings you are able to secure on your new policy may outweigh this penalty. If not, consider making the switch to your new policy on your renewal date instead of mid-term. When you switch on renewal, notify your insurance company that you will not be renewing ? as not communicating your cancellation request can leave you exposed to a non-payment policy cancellation on your record. Plus, there will be no mid-term refunds to deal with. Take the time to figure out which of these options will save you the most money; if the new rate is really that much better, it?s time to make the switch.
Other Considerations When Cancelling
When you cancel your old policy and move to a new company, bear in-mind that you will not be able to take accident forgiveness with you. Make sure that the new company has given you a quote based on everything that is on your driving record. Accident forgiveness generally does not transfer from one company to the next. When you change companies you will also lose any longevity discounts and multi-policy discounts.
It is your right to change auto insurance companies whenever you like, but bear in-mind that insurance companies do have the right to charge penalties for early cancellation depending on the circumstances. By ensuring you are aware of the full impact of cancelling before you make the change you can avoid any surprises and make the transition smooth.