Mathew B. Sims is Editor-in-Chief and has authored, edited, and contributed to several books. He has been working in the insurance industry ensuring content is accurate for consumers who are searching for the best policies and rates. He has also been featured on sites like UpJourney.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years (BBB A+). He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com and Safeco. He reviews content, ensuring that ex...

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Dec 28, 2020

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Things to remember...

  • To get the bests deal possible and the best coverage for your needs, you may need to switch insurance companies often to find the best auto insurance company for you.
  • Switching auto insurance companies does not harm you if you follow the right steps.
  • You can locate a new auto insurance policy with the help of a comparison tool.

If you are constantly looking for the best deals on auto insurance, you may be wondering how to change auto insurance companies to get the best deal. Is it bad to switch auto insurance companies often?

The good news is that switching auto insurance companies to get better rates, better insurance, and better customer service does not hurt you if you do it the right way. Changing auto insurance companies might be just the thing to save you money.

If you’re thinking about switching auto insurance, we can help. Compare auto insurance quotes right here by entering your ZIP code above and comparing rates from top companies.

Table of Contents

How can I switch auto insurance companies?

Switching auto insurance is easy when you know the right steps to take to ensure that you remain covered. The first tip to remember is not to cancel your current policy until you’ve secured your new policy.

  • Find a New Policy – You can use an auto insurance comparison tool to locate a new auto insurance policy that meets all of your criteria.
  • Read the Results – Once the comparison tool gives you all of your results, you should read through each policy, determine the amounts of coverage, any exclusions, and the price.
  • Choose Your New Policy – After reading the results, go ahead and choose the best policy for your and your family’s needs.
  • Purchase Your New Policy – You can purchase your new auto insurance policy directly online and print out all of the information.
  • Check to Make Sure Your New Policy Is Active – After you purchase your policy and print out all of the information, including your new temporary cards, make sure your policy is active or note the date the policy starts.
  • Cancel Your Old Policy – Once you have determined that your new policy is active, call your old insurance company and cancel your old policy. They may take cancellation requests over the phone, or you may need to provide them with an official cancellation letter.

Why would you want to switch? Keep reading to discover reasons you might want to switch your auto insurance company or policy.

What are the reasons to switch auto insurance companies?

There are many reasons to shop for auto insurance and change insurance companies. The number one reason is to save money, but switching auto insurance can do more for you than just benefit your pocketbook.

  • You Just Moved – If you move locations, especially to a new state, your old auto insurance company may not be authorized to sell insurance in your new state.
  • Your Insurance Company Just Raised Your Rates – Whether your rates went up for no reason or you just filed a claim, any time your auto insurance company raises your rates is a good time to shop the market for lower rates.
  • Your Last Claim was Denied – A claim denial can cause you to feel financially insecure, especially if you cannot afford to repair or replace your car. Switching insurance companies can help you find a company with better customer service that can give you the peace of mind you need.
  • You Will Soon Have a Teen Driver – Adding drivers can cause your rates to increase. When you add a driver, including any teen drivers, you should shop the market to see if a different insurance company will provide you with the additional coverage you need while not causing you financial hardship.

Is switching insurance companies bad? Not if your current company is not fulfilling your needs.

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Will switching auto insurance companies save money?

Need to save money on your auto insurance? Drivers can save up to 40 percent on auto insurance rates by switching companies through comparison shopping.

  • An auto insurance rate comparison will determine if the rate you have now is better than the others available.
  • Each cheap auto insurance company takes into account a variety of factors when determining how much risk you represent to the company before offering you an insurance policy quote.
  • If you choose to switch insurance companies, make sure your new coverage starts before you cancel your old policy.

Will switching your auto insurance every six months save you money? This is a question that consumers ask every day and one that many insurance companies would like you to think is true.

The answer to this question is — maybe. An auto insurance rate comparison will determine if the rate you have now is better than the others available.

Check out this table of average annual auto insurance rates for top companies to get an idea of just how much rates can change by coverage and company.

Average Annual Auto Insurance Rates By Coverage Type
CompaniesAverage Annual Auto Insurance Rates for High CoverageAverage Annual Auto Insurance Rates for Low CoverageAverage Annual Auto Insurance Rates for Medium Coverage
USAA$2,667.92$2,404.11$2,539.87
American Family$3,416.40$3,368.49$3,544.37
GEICO$3,429.14$3,001.91$3,213.97
State Farm$3,454.80$3,055.40$3,269.80
Nationwide$3,505.37$3,394.83$3,449.80
Progressive$4,350.96$3,737.13$4,018.46
Farmers$4,494.13$3,922.47$4,166.22
Travelers$4,619.07$4,223.63$4,462.02
Allstate$5,139.02$4,628.03$4,896.81
Liberty Mutual$6,356.04$5,805.75$6,058.57
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There are many factors that go into calculating the rate you will pay on any given insurance policy. It’s important to understand what is affecting your rates.

Before you can understand whether or not switching your insurance policy to another company will save you money, you must first understand how each of these underwriting factors affects your rates.

Once you understand how your rates are affected, you will be more knowledgeable about how to change auto insurance companies with saving money in mind.

Changing auto insurance companies can be financially beneficial. Drivers who switch their auto insurance companies can save between 10 and 14 percent on their policy.

  • Free auto insurance comparison websites let you evaluate rates quickly and switch from one company to another.
  • Because the industry does not have a single standard, each insurer sets its own prices relative to these factors.
  • Some policy discounts are standard across virtually all companies, such as multiple policy discounts or good driving discounts.
  • When you are thinking about changing auto insurance companies, you should also consider how much insurance coverage you truly need.
  • Lowering rates and adding discounts are tempting benefits, but they may not be worth the cost of leaving your current insurer.
  • The easiest way to make the decision is to request a no-obligation comparison of several insurance companies.

Continue reading to see if changing auto insurance companies will be beneficial for you.

How can you tell if you need to change auto insurance companies?

Should you change auto insurance every year? How often should you change insurance companies?

Periodically review your auto insurance plan to make sure you are getting the best rates and if necessary start learning how to change your auto insurance plans. Comparing rates from different insurers can save you up to $100/mo. on your policy.

  • Auto insurance is one of the most important financial purchases you will make.
  • The purpose of auto insurance is to provide you with financial protection if you are involved in a car accident, even if you are not at fault.
  • Insurance review websites are also a good source for information regarding auto insurance companies.
  • You should also review your auto insurance each time it comes up for renewal to make sure you are getting the best rates possible and your insurance needs have not changed.

From time to time, it is necessary to evaluate your insurance coverage to make sure you are getting the best protection possible at the lowest rate.

This means that it may be necessary to change auto insurance companies from time to time based on available rates.

When should you review your auto insurance policy?

It is a good idea to periodically review your auto insurance policy to see if you have the best auto insurance company. There are numerous signs that may prompt you to begin looking at other insurance companies.

However, you should review your insurance each time your auto policy is up for renewal.

Renewal is a good time to reevaluate your policy because it is when you may see rate changes, particularly if you have filed any claims on your policy. You may also see an increase in your rates if you have received traffic violations.

Another reason to review your auto insurance policy is when you have changes that impact your insurance needs.

For example, if you have a teenager who has recently received their driver’s license, you should talk to your insurance company or agent about the best way to add them to your policy. It is possible to find cheap auto insurance quotes for teens online.

You should also talk to your insurance company or broker if your teen has left for college. Other reasons to review your policy include purchasing a new car, selling a car, or if you are no longer driving a car on your policy.

Your broker may also recommend changes to your coverage as your car ages.

Can you switch auto insurance companies too often?

No, you really can’t switch too often. There is no penalty for switching auto insurance companies, but you might have to pay termination fees. Make sure to check your policy before you switch so you know if it’s worth it.

Should you switch auto insurance after an accident?

Changing your auto insurance policy after an accident is fine. You can switch companies at any time, but if you are still dealing with an accident claim, it can become more complicated.

You will have to deal with multiple insurance companies and will need to disclose the accident to your new company.

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When should you change auto insurance companies?

Avoid cancellation fees by waiting to cancel your auto insurance until you’re up for renewal. Compare quotes from multiple companies to lower your bill by up to 20 percent.

  • Changing auto insurance companies isn’t as difficult or tedious as it sounds.
  • The best time to switch is when you are up for renewal.
  • You want to save money while enjoying the same coverage, so you should use your current levels when comparing quotes.
  • Shop around by visiting sites that let you compare different auto insurance companies.
  • Look at online reviews of the company from other consumers.

Changing auto insurance companies isn’t as difficult or tedious as it sounds. Making a switch like this can save you hundreds on your auto rates.

However, there are a few things you should keep in mind when making this kind of change. Use research to get knowledge about the decision you could be making.

You’re better off canceling your auto insurance policy than having it canceled. If for some reason you simply allow the policy to lapse and don’t pay it, that creates a cancellation on your record.

Having a cancellation on your auto insurance record can send a signal to other potential insurers that you’re a high-risk customer, which will in turn lead to higher rates.

Can you change your auto insurance policy at any time?

Can I switch auto insurance before my renewal date? You can always change your auto insurance policy, especially if you need to change coverage, add a vehicle, or notify your provider that you’re moving.

  • Auto insurance policies can be changed via mid-term endorsements.
  • The ability to change your policy may also impact your rate.
  • Buying a new car, changing coverage limits, or moving may all be reasons to alter your policy.

Auto insurance is seen by so many consumers as a contract. When you buy an auto insurance policy, you are buying a contract that entitles you as a consumer to coverage over a specified period of time.

But what happens when you need to make a change to that contract? Most people think of contracts as binding, set in stone in a way.

The general thought process is that they cannot be changed. When it comes to auto insurance, though, that could not be further from the truth.

Consumers are always in control of what they have in terms of an auto insurance policy. It is up to them to reach out to their current insurance company and state what they want and what they need out of their policy.

If the current auto insurance company that they have is not able to provide that to them, consumers have the ability to shop around in order to end up where they want to be in terms of their policy.

Don’t allow a lapse in coverage. Make sure that the start date for your new auto insurance policy coincides with the effective ending date of your existing policy.

The last thing you want to happen is to get in an accident while you’re temporarily uninsured.

This is especially true if that interim is spent driving from one part of the country to another with all of your worldly possessions in your vehicle. If you’re in an accident or your vehicle is stolen, you’re going to be in a world of hurt.

Ultimately, switching insurance companies is a fairly simple process, as long as you keep these few things in mind.

You do want to make sure to have a new policy before canceling your old one. The table below shows the consequences of a coverage lapse.

Six-Month Auto Insurance Rates for No-Lapse vs Lapse in Coverage

CompaniesAverage Six-Month Rates with No Lapse in CoverageAverage Six-Month Rates with a Lapse of CoverageAverage Rates Increase
Nationwide$651.19$736.5213.10%
Liberty Mutual$696.00$810.0016.38%
Geico$730.18$786.887.77%
Progressive$882.00$901.002.15%
Farmers$974.82$1,090.811.90%
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Your auto insurance rates will go up if you don’t keep continuous coverage.

Want to change auto insurance companies online? Multiple rate comparisons can save you up to $100/mo. on your policy. Comparing today can save you 10 percent.

  • The standard practice for most companies is to allow you to cancel your policy any time you wish.
  • Whether you want to get a better deal on your rates, or whether you’re moving from one state to another, there are some important steps you need to follow in order to make the transition as seamless as possible.
  • Make sure, if you are going to switch auto insurance companies, that the start date for your new auto insurance policy coincides with the effective ending date of your existing policy.

One of the benefits of sticking with the same auto insurance company is that it’s just simpler not to switch. If you’re not unhappy with your company then you don’t have a compelling reason to look elsewhere, but it’s still important to know how to change your insurance company.

Unfortunately for many folks, auto insurance is one of those products that you really don’t know how well it performs until you need to use it typically after an accident.

The catch-22 here is that, after an accident, your rates may go up significantly and other insurance companies may not be willing to bring you on as a client.

Still, sometimes it’s just in your best interest to switch auto insurance companies.

Can you change auto insurance at any time? Most companies offer mid-policy cancellation policies that make it easy to do.

Whether you want to get a better deal on your rates, or whether you’re moving from one state to another, there are some important steps you need to follow in order to make the transition as seamless as possible.

Here are the things you need to keep in mind when you’re getting ready to switch auto insurance companies.

Can you switch auto insurance mid-policy?

What about switching auto insurance mid-policy? Changing an auto insurance policy in the middle of its effective period is always going to be possible.

When you initially purchase an auto insurance policy, it is going to have coverage laid out on that policy over the stipulated policy period that is clearly spelled out on the declarations page.

In the event that you need to change anything on that policy, this is where what is known as a mid-term endorsement is going to come into play.

A mid-term endorsement is when you want to have a policy changed midterm, while it is already in effect and before it has expired.

The process for this is pretty simple as all you have to do is to reach out to your insurance company and simply ask for the change. Once it is processed, a new policy with the endorsement will be processed and put into effect.

How often can you change auto insurance? The standard practice for most companies is to allow you to cancel your policy any time you wish. Usually, you’ll need to send them a written notice that also states the date of cancellation.

Just not paying the next bill isn’t the way to go, because the company will still continue to bill you. If you don’t then pay it, that bill will wind up as a negative ding on your credit report.

Is there a financial impact of a mid-term auto insurance policy change?

The thing to remember is that whenever you want to make any type of change to your insurance policy, there is going to be a rate impact that goes along with it.

Say you want to swap out your used car for a new car. Chances are your rate is going to increase due to the higher value automobile that is being covered.

The same can be said if you want to reduce your deductible or increase your coverage limits. Both of these are likely to have an impact on your rate that causes it to increase.

The opposite of this is what you can expect should your deductible be increased or coverage limits reduced. Even if you were to switch to a car that had less value, this would all cause your auto insurance rates to go down.

The important thing to remember when it comes to your auto insurance policy is that you always have the ability to change things and make adjustments.

No auto insurance company expects you to make zero significant changes over every single policy period that you have.

Mid-term endorsements are available for any of the following scenarios:

  • You move
  • You get a new car
  • You want to change coverage

It is up to you as a consumer to do price comparisons with all of the companies out there so you can get the exact coverage you want at a rate you can afford.

How do you sign with a new auto insurance company?

Once you have selected the company you will switch to, you are ready to sign up with them. This will ensure that you do not have any lapse in coverage, keeping you legal and protected at all times.

You can go through an agent or call the company directly, depending on the company you choose.

If your current company will provide you with a partial refund, then you can sign up for immediate service.

If you need to wait until your existing policy expires, then have the new coverage begin the day your existing coverage expires.

It is vital that you do not have any lapse in coverage as this can result in steep fines with some states.

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What are the hazards of canceling your auto insurance policy incorrectly?

Whatever you do, do not stop paying your old bill until your new policy is active and you’ve officially told your old insurance company that you have a new policy and wish to cancel. This is an important step in how to change your auto insurance provider.

If you stop paying your bill without informing your old insurance company, they could report you to the credit bureaus for nonpayment, which could negatively affect your credit score.

If you cancel your old policy before your new policy is active, you could create a lapse in your insurance coverage.

During a lapse, you are not covered by any insurance policy, and if you get into a car accident during that time, you could face dire consequences, including having to pay for all of the accident-related damages and being sued by the other driver.

You could also have your license revoked, have to pay high court costs, and face higher auto insurance rates in the future.

Switching auto insurance companies frequently will not harm you if you follow the appropriate steps.

To get started, you can use our comparison tool to help you find a more affordable auto insurance policy with an insurance company that you trust to provide you with the coverage you need.

What are some things that can change?

You can change pretty much anything on your auto insurance policy mid-term. In the event that you go out and purchase a new car, you can call your auto insurance company or go online to their website and add that vehicle, replacing the one that you already had.

Another example of a mid-term policy change would be to increase limits or alter your deductible. If you decide halfway through your policy’s term that your deductible is not where you want it to be, you can have that tweaked to have it increased or decreased.

When you change auto insurance, remember to change your home and auto insurance together if you hold a bundled policy.

Changing where you live and where your cars are parked can also have an impact on your policy.

When you change your residence, you want to be sure that you are adjusting that address on your auto insurance policy. An address change could be beneficial to you rate-wise as well.

What are the cancellation requirements for auto insurance?

The best time to switch is when you are up for renewal. However, you can switch anytime in most states.

Before committing to a company and signing another contract, talk to your existing company to see if you will be charged any fees for leaving before the term completes.

If you have prepaid your auto insurance, find out if you can receive a refund for the unused portion. Even if you need to wait a few months to avoid penalties, it’s still a good idea to start shopping around ahead of time.

You can always profit from researching how to save on current auto insurance rates. Auto insurance comparison websites make it quick and free.

Use your current coverage. Getting cheap auto insurance is meaningless if you have inadequate coverage. You want to save money while enjoying the same coverage, so you should use your current levels when comparing quotes.

The levels can always be changed or adjusted later, but when you are trying to find a company offering a better price, make sure you are using the same coverage levels across the board.

Shop around for auto insurance. Start by visiting sites that let you compare different auto insurance companies. The process is incredibly fast, and you will only have to enter your information once.

After submitting your information, you will receive quotes from different agencies. Compare the quotes to find the two or three most affordable companies.

Start by researching different companies if you are ready to start looking at company reviews. Agencies like J.D. Power provide valuable ratings in areas like customer service, ease of paying bills, and insurance offerings.

Avoid companies with extremely low customer satisfaction ratings, as they may not be there for you when you need them most.

Look at online reviews of the company from other consumers. You should expect to find something negative about any company; it’s simply part of doing business.

However, the bulk of the information should be positive and indicate that the company supports its customers and pays claims promptly.

Financial ratings from agencies like Moody’s and A.M. Best are also important. These ratings are a strong indicator of a company’s financial strength and its ability to pay claims.

Look for stable companies that are rated with at least a B or higher.

Finding a trustworthy auto insurance company may seem difficult, but with the right amount of online research and rate comparisons, you can know exactly what to look for.

How do you cancel your old auto insurance policy?

There are a few options for canceling the old policy. You can let the new insurance company handle the process for you, provided they offer that service.

If you choose this option, be sure to get something from them in writing showing that they handled this step.

Another option is to cancel the policy yourself. Most companies require that you send a written letter informing them of your intent to cancel the policy.

Do not cancel the old policy until you have confirmation that the new one will be in effect. However, it is a good idea to call them a few weeks in advance, rather than trying to complete the process on the day your policy expires.

Free Auto Insurance Comparison

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Free Auto Insurance Comparison

Enter your ZIP code below to view companies that have cheap auto insurance rates.

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Advantages of Changing Auto Insurance Companies

Moving from one auto insurance company to another can yield substantial benefits. Some of the biggest savings come from lower rates, more discounts, and programs that better match your auto insurance needs.

Reduce Auto Insurance Rates

Insurance companies base auto insurance rates on a number of factors, including driving experience, accident history, vehicle safety, and the location of the automobile.

Because the industry does not have a single standard, each insurer sets its own prices relative to these factors.

A quick comparison of auto insurance quotes can give you an idea of whether you are currently paying too much for your coverage.

Take Advantage of Additional Auto Insurance Discounts

Some policy discounts are standard across virtually all companies, such as multiple policy discounts or good driving discounts. In other cases, the insurance companies choose to offer some discount programs and discard others.

By switching auto insurance companies, you may gain access to discounts that substantially reduce your monthly payments. So it is always a good time to re-ask, “Do I qualify for an auto insurance discount?”

Some of the unique auto insurance discounts offered by companies include:

  • Progressive’s Snapshot discount – This uses a tracking device to monitor driving habits. The company claims that good drivers can shave up to 30 percent off their auto insurance rates.
  • Nationwide’s farm bureau discount – Members in California, Ohio, Pennsylvania, West Virginia, Connecticut, Vermont, Delaware, and Maryland can save 10 percent or more.
  • Allstate’s 55 and Retired program – This gives a 10 percent discount to qualified drivers.
  • State Farm’s good student discount – This is for full-time high school and college students. Individuals must be younger than 25 and hold a B average or better.

Not all auto insurance discounts are available in all states. The simplest way to determine your eligibility is to request a free insurance comparison quote from multiple companies.

Instead of looking at generic information on numerous websites, you can see exactly what you would pay under specific circumstances from an auto insurance comparison website.

Reevaluate Your Auto Insurance Coverage Options

When you are thinking about changing auto insurance companies, you should also consider how much insurance coverage you truly need. Here are a few questions to answer:

  • Are you carrying $100,000 of collision coverage on a car that is only worth $2,000? Collision coverage pays to repair or replace your vehicle after an accident, but you will only be compensated up to the amount the vehicle is worth.
  • Have you recently moved into an area with high winds, fire danger, or a high risk of vandalism or theft? In those cases, you may want to evaluate the comprehensive portion of your auto insurance policy, which protects against non-collision-related damage.
  • Has your city been hit hard economically? In tough times, some drivers choose to drop their insurance coverage altogether. To protect yourself against uninsured drivers, you may want to increase your uninsured/underinsured motorist coverage.
  • Will you be adding a teen driver to your policy within the next year? Auto insurance comparison sites let you estimate the cost of insuring the whole family without any obligation to purchase that coverage. Looking at several quotes can give you a better idea of which insurance company will meet your needs now and in the future.

Auto insurance isn’t one size fits all. You can pick and choose exactly the right coverage for you. Reevaluate what you really need when you switch companies.

Disadvantages of Switching Auto Insurance Policies

In many cases, switching auto insurance companies pays off for savvy shoppers. At the same time, if you are tempted by low quotes, be sure to consider what you will be leaving.

Pay Termination Fees or Penalties

Some insurance companies charge penalties for consumers who cancel their coverage before their renewal dates.

If your current insurer charges early termination fees, make sure that the savings you gain from switching companies offset these penalties.

You Can Lose Loyalty Discounts

Many auto insurance companies reward customers who have been insured with them continually for three years or more. In some cases, these discounts equate to savings of up to 25 percent.

Factor in these discounts when you are comparing quotes from several different cheap auto insurance companies.

You Can Lose Accident Forgiveness

Most drivers fear that their insurance rates will increase after an accident. To minimize this stress, a few companies have started accident forgiveness programs.

For drivers who have been accident-free within the previous three years, these programs guarantee that a minor collision will not increase rates.

Some companies go a step further and guarantee that a major accident will not impact rates for people with safe driving records over the previous five years.

Compare Auto Insurance Companies

Before changing your auto insurance policy, you should approach the process as if you are buying auto insurance for the first time. There are risks of changing insurance companies but mainly it comes down to how satisfied you are with them.

You will need to compare rates from several different companies and research potential companies to find out background information on them before making a purchase decision.

Check an Auto Insurance Company’s Consumer Satisfaction

Consumer satisfaction is a major consideration when buying auto insurance. Look at J.D. Power and Associates’ website to find out about auto insurance companies with the highest consumer satisfaction rates.

J.D. Power conducts an annual survey and reviews auto insurance companies. The results of their annual survey are on their website.

Check an Auto Insurance Company’s Financial Strength Ratings

Financial stability is also extremely important when choosing an auto insurance company.

Fitch, Standard and Poor’s, and A.M. Best regularly monitor insurance companies and evaluate their financial reserves, financial practices, and credit rates. You can review this information on their websites.

Check an Auto Insurance Company’s Legal Status

It is easy to find auto insurance companies simply by looking on the internet. However, it is important that any potential auto insurance company be legally authorized to operate in your state.

You can find out information about legal standing in your state by visiting your state’s Department of Consumer Affairs website.

There you will find information about companies legally licensed to operate in your state. You will also find information about insurance agents and brokers.

Additionally, these websites will have information about lawsuits and complaints filed against insurance companies, brokers, and agents.

Check an Auto Insurance Company’s Reviews

Insurance review websites are also a good source of information regarding auto insurance companies. Review websites include detailed information about products and services an insurance company provides.

You can also find out information about pricing compared to other insurance companies, the effectiveness of customer service, and potential problems with an insurance company.

Review websites frequently have a forum or consumer review section where customers talk about their experiences with specific insurance companies.

Check an Auto Insurance Company’s Website

You can also find out information about auto insurance companies by going to their corporate websites.

Here you will find out information about the different products and services they offer. You can also request a rate quote from a corporate insurance website.

Check With an Independent Insurance Broker

Independent insurance brokers represent many different insurance companies. If you are reviewing your current insurance needs, they can usually make recommendations regarding your insurance coverage.

They may also make recommendations on ways to lower your rates and keep your payments low. Independent insurance brokers frequently review your policy needs for you when your auto insurance is up for renewal.

It is a good idea to periodically review your auto insurance needs. If you have had changes that impact your auto insurance, you should contact your agent or insurance company to review your insurance coverage.

You should also review your auto insurance each time it comes up for renewal to make sure you are getting the best rates possible and your insurance needs have not changed.

As part of your review process, find out if your current auto insurance company is financially stable and whether or not there have been complaints filed against them that may impact your own experiences with them if you need to file a claim.

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How do auto insurers calculate your rates?

The amount of money you pay for a cheap auto insurance policy is a safe reflection of how likely you are to file a claim. Insurance companies, like most companies, are for-profit businesses.

Whether the company is public or private, they have stakeholders to answer to and each claim paid out is money that does not become part of the insurance company’s bottom line.

Each cheap auto insurance company takes into account a variety of factors when determining how much risk you represent to the company before offering you an insurance policy quote.

Of course, your driving record is a major player in determining your level of risk.

If you have several tickets or a couple of accidents on your record, you represent a higher risk to the insurer because it appears that you have a more aggressive driving style.

Another factor that comes into play is your credit score. While your credit history may not provide any insight into how you drive, it does provide a sneak-peek into whether or not you will be paying your insurance rates on time.

It also shows whether or not you are a high-risk candidate for insurance fraud, or staging an accident or theft in order to collect insurance benefits.

The vehicle you drive is another indicator that an insurance company uses. The flashier and more expensive a vehicle is, the more likely it is to be stolen and therefore end up as a claim.

Performance cars tend to be driven more aggressively and therefore wind up causing more claims.

What is tiered pricing for auto insurance?

Insurance companies analyze years of data and compile this information into a scoring model to determine how large a risk you represent to the company. That score is then fed into a tiered pricing system which then determines how much you’ll pay.

And then there is the insurance company’s pricing model itself. Larger, well-known companies have more overhead and therefore tend to be a bit pricier than smaller, less conspicuous companies.

For instance, most of us can name several insurance companies right off the tops of our heads thanks to the sheer number of advertisements that we see and hear.

But the costs involved with making that company a well-known name in the industry are passed on to the consumer via higher costs.

Another factor for higher prices is the financial health of the insurance company itself. Companies that are struggling to raise capital tend to raise the prices of their products in order to generate more revenue.

Financially healthy companies can lower prices in order to attract new customers without damaging their bottom lines.

What consumers are targeted for auto insurance?

Additionally, different insurers are often looking for a specific segment of the driving population to target.

Most insurance companies do not publicly advertise the type of customer they are looking for, but if you happen to find the right insurance company during a comparison shop, you will notice that your quote is lower than with most other companies.

The truth is that while auto insurers would like consumers to think that they are competitive with all their products, oftentimes they lower the prices on only one or two particular products.

They also offer lower rates to drivers within a specific organization or demographic in order to sign the customers they are looking for.

Next comes the insurance coverage itself. As the consumer, you ultimately decide what you will pay for your insurance policy based on the choices you make regarding your coverage.

Raising your deductibles or liability limits will result in higher prices. Adding coverages will increase the cost while removing them will decrease the cost.

Also, by having multiple policies with one company, belonging to a particular organization, or completing a driver safety course, you can net a few discounts along the way.

The only way to know for sure is to ask for quotes from a variety of companies and compare policies in order to see whether or not switching insurers will save you money.

Make sure when you compare quotes that your coverage, limits, and deductibles are the same, otherwise, the quote comparison will not be accurate.

Obey Your State’s Auto Insurance Requirements

Most states require that drivers carry auto insurance coverage, but there is a difference in the minimum required auto insurance coverage between states.

Failure to comply can result in steep penalties and fines. Many states require insurance companies to notify them when they sign a new customer or lose an existing one.

If the state receives notification that you are no longer insured and they do not have a notice showing that you have acquired insurance elsewhere, you could be facing serious legal troubles.

This is why it’s vital that you have the new insurance ready to go before canceling your existing policy.

If everything goes right, you will have seamless auto insurance coverage. The new plan will pick up where the old one left off, and you will enjoy lower rates.

The process isn’t difficult, and most companies will even assist you with canceling the old policy.

The most challenging part will be choosing your new auto insurance provider, and with the help of comparison sites that will be a breeze.

Overall Verdict on Switching Auto Insurance Companies

In the end, the decision of whether to change auto insurance companies is a personal preference, as is how often to change auto insurance.

Lowering rates and adding discounts are tempting benefits, but they may not be worth the cost of leaving your current insurer.

The easiest way to make the decision on changing auto insurance is to request a no-obligation comparison of several insurance companies.

You can review the quotes and discover the best policy for your current auto insurance needs.

Thinking about changing auto insurance companies? Enter your ZIP code into our free auto insurance comparison tool to start comparing quotes and changing insurance companies before renewal.