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Mandatory Insurance Coverage
|Apart from New Hampshire and Virginia,
car insurance is mandatory
|Cheapest Car Insurance Provider||USAA & Geico|
Do you change your auto insurance policy often or stick with the same auto insurance company because you’re happy with their rates and services?
Buying a policy requires a lot of effort in terms of research and seeking quotes, but your work shouldn’t end there. Periodically, you should assess the rates and benefits of your policy to make sure it’s worth the price.
Sounds like a lot of work?
Don’t worry, in this article, we will cover when exactly should you switch your auto insurer and how you can ensure that you’re paying reasonable rates for your coverage. Some life events and changes in auto ownership demand changes in an auto policy, so we will write about those as well.
Updating Your Auto Insurance Policy
Some changes in life, however big or small, warrant the need to review your auto policy for any updates. For instance, if you get married, you can enjoy discounts on car insurance with your partner, whereas individual policies will cost more for both of you.
Another scenario involves purchasing a house — many insurers offer bundling discounts if you buy auto and home insurance from them.
If you want to know more about how bundling can save you money, watch this video:
– When Should You Update Your Auto Policy
You can update your policy just to get a better rate or because of a big change in your current situation — like your kids getting a driving permit.
Let’s look at some scenarios when you should update your policy.
– Purchasing a New Vehicle
When you’re driving an old car in college, you don’t care about how much insurance coverage you carry. You’re also content with only liability coverage because you drive on limited routes.
But, later on, when you buy a new car or a family car, you have to think about upgrading your coverage limits and buying collision and comprehensive coverage if you haven’t already.
Though most states make it mandatory for motorists to buy minimum coverage, you should always consider buying a higher level of coverage to protect yourself from major accidents.
Experts recommend you carry at least $500,000 in liability coverage, including both personal injury and property damage. Liability coverage will help you pay for any medical injury expenses or property damages sustained by the other party in an accident that is your fault.
To avoid paying exorbitant repair or replacement costs on a new vehicle, consider buying collision and comprehensive coverage, as these options would pay for any damages to your car regardless of fault. We all know how much repairs can cost for a new car.
Fortunately, collision and comprehensive insurance aren’t expensive. The average annual expenditure on collision insurance is $342 and for comprehensive coverage, it’s $153.
Paying for a few extra auto coverage options will buy you peace of mind.
– Changes in Income or Personal Assets
Say your aunt just left you a big part of her estate or you just got hired for a job that doubles your current income.
Aren’t you curious to know how are those two scenarios relate to car insurance?
Low liability coverage limits can’t cover all expenses incurred in a major accident, especially when the injured party decides to sue you for recovering non-economic damages, i.e. pain and suffering.
Since it’s difficult to quantify someone’s pain and suffering, some lawyers try to take advantage of the situation by seeking a large reimbursement depending on the at-fault party’s net worth. So, if you have a lot of personal assets, those could be at risk.
That’s why you should increase policy limits when you inherit or get a huge jump in income.
– Adding Teenagers to Your Auto Policy
Teenage drivers are responsible for the majority of the crashes on roads.
This is why an average married couple is quoted a rate 90 percent above the base rate when they add their 16-year-old kids.
As per the Consumer Reports data analysis, some insurers charged married couples as much as 250 percent more than their previous rates when they added a teenage child on their policy.
If you are planning to add a teenage child to your policy, research your options well. In the above illustration, Consumer Reports has analyzed rates for hypothetical policyholders to calculate the increase in premiums when they add a teenage child.
Among all the states, Alaska has the highest rise in premiums when a teenage child is added and Hawaii has the lowest.
– Making Changes to Your Auto Insurance Mid-Term
Making changes to your policy is financial prudence, but can you do it mid-term? You might have to make changes any time during the policy term, so let’s look at if you would be allowed to do so by your insurance provider.
– Changing Your Policy Coverage Limit or Adding Optional Coverage
Changing your policy coverage limits can be done at any time during the policy period — but you can’t decrease your coverage level below the state minimum requirement.
Here’s the minimum liability coverage mandate in all the states:
|State||Insurance required||Minimum liability limits|
|AL||BI & PD Liab||25/50/25|
|AK||BI & PD Liab||50/100/25|
|AZ||BI & PD Liab||15/30/10|
|AR||BI & PD Liab, PIP||25/50/25|
|CA||BI & PD Liab||15/30/5|
|CO||BI & PD Liab||25/50/15|
|CT||BI & PD Liab, UM, UIM||25/50/20|
|DE||BI & PD Liab, PIP||25/50/10|
|DC||BI & PD Liab, UM||25/50/10|
|FL||PD Liab, PIP||10/20/10|
|GA||BI & PD Liab||25/50/25|
|HI||BI & PD Liab, PIP||20/40/10|
|ID||BI & PD Liab||25/50/15|
|IL||BI & PD Liab, UM, UIM||25/50/20|
|IN||BI & PD Liab||25/50/25|
|IA||BI & PD Liab||20/40/15|
|KS||BI & PD Liab, PIP||25/50/25|
|KY||BI & PD Liab, PIP, UM, UIM||25/50/25|
|LA||BI & PD Liab||15/30/25|
|ME||BI & PD Liab, UM, UIM, Medpay||50/100/25|
|MD||BI & PD Liab, PIP, UM, UIM||30/60/15|
|MA||BI & PD Liab, PIP||20/40/5|
|MI||BI & PD Liab, PIP||20/40/10|
|MN||BI & PD Liab, PIP, UM, UIM||30/60/10|
|MS||BI & PD Liab||25/50/25|
|MO||BI & PD Liab, UM||25/50/25|
|MT||BI & PD Liab||25/50/20|
|NE||BI & PD Liab, UM, UIM||25/50/25|
|NV||BI & PD Liab||25/50/20|
|NJ||BI & PD Liab, PIP, UM, UIM||15/30/5|
|NM||BI & PD Liab||25/50/10|
|NY||BI & PD Liab, PIP, UM, UIM||25/50/10|
|NC||BI & PD Liab, UM, UIM||30/60/25|
|ND||BI & PD Liab, PIP, UM, UIM||25/50/25|
|OH||BI & PD Liab||25/50/25|
|OK||BI & PD Liab||25/50/25|
|OR||BI & PD Liab, PIP, UM, UIM||25/50/20|
|PA||BI & PD Liab, PIP||15/30/5|
|RI||BI & PD Liab||25/50/25|
|SC||BI & PD Liab, UM, UIM||25/50/25|
|SD||BI & PD Liab, UM, UIM||25/50/25|
|TN||BI & PD Liab||25/50/15|
|TX||BI & PD Liab, PIP||30/60/25|
|UT||BI & PD Liab, PIP||25/65/15|
|VT||BI & PD Liab, UM, UIM||25/50/10|
|VA||BI & PD Liab (9), UM, UIM||25/50/20|
|WA||BI & PD Liab||25/50/10|
|WV||BI & PD Liab, UM, UIM||25/50/25|
|WI||BI & PD Liab, UM, Medpay||25/50/10|
|WY||BI & PD Liab||25/50/20|
You can also increase the deductibles on your policy if you want to lower your premiums, but doing so may mean you’d have to pay the major part of the expenses for a minor accident.
Motorists are also allowed to add any optional coverage or riders/endorsements to their policies mid-term. For instance, if you suffered a mechanical breakdown while on a holiday, you would have to pay for it out-of-pocket.
You can add a mechanical breakdown coverage to your policy so that you don’t have to pay for the expenses again.
Though you have the option to add optional coverage online, it would be better if you call your insurance company to understand what coverage you may need depending on your situation.
– Making Temporary Changes to Your Auto Policy
Many motorists buy state-minimum liability coverage to keep their premiums low.
But what happens when you’re traveling somewhere far? Would your policy limits be enough to cover the expenses of any major accident?
Motorists can increase the limits of their insurance policy while on vacation or for a certain period of time.
There’s a workaround to make changes to your policy for a specific period of time. Initially, you will have to make changes effective until the end of the policy period, but you can cancel the extra coverage whenever you don’t need it anymore.
Your insurance carrier will refund the pro-rated premium amount from the cancellation date to the end of the policy period.
For any physical damage coverage, most insurance companies will require motorists to get the vehicle inspection done to assess a cars’ value.
– Adding Drivers to Your Auto Policy
You need to add drivers who regularly use your car to your policy, or else you might be denied coverage if the other person gets involved in an accident driving your car.
When should you add someone to your policy?
Anyone living with you — who has access to your car and a driving license — should be added to your policy. It can be your spouse or kids or even roommates.
If your roommate uses your car only occasionally, even then consider adding them because some insurance companies only settle claims when the crash was caused by drivers named on the policy.
Should you add guests to your policy?
If your guests are coming over for a brief period of time and use your car occasionally, you wouldn’t need to add them to your policy. Guests can also mean your college-going kids — as long as their permanent address is different from yours.
But if a guest uses your car frequently for a long period of time, you should add that person to your policy. In any case, don’t forget to call up your insurance provider to know whether you need to add occasional drivers or not.
How do you add a new temporary driver?
Simply call your car insurance provider (and some insurers also allow you to add drivers online).
This may not raise the premiums for you; however, adding permanent drivers would impact your premiums. Therefore, you need to shop around if the change is permanent.
Compare quotes from the top auto insurance companies and save! Secured with SHA-256 Encryption
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Renewing an Auto Insurance Policy
Usually, your auto insurance policy renews automatically when the policy period ends at six or 12 months, in which case you wouldn’t have to worry. But at times, it doesn’t auto-renew. If you miss renewing your policy, you would go out of coverage, which is illegal in most states.
– When Does an Auto Policy Renew?
Most of the auto policies are effective for six months, after which you have the option to either renew or cancel it. If it’s set to auto-renew, you would need to call up your agent to cancel.
Similarly, your car insurance company would contact you if they aren’t planning to renew your policy for any reason — at least 45 – 60 days before the expiration date.
– Would Your Rates Go Up At Renewal?
The simple answer is: rates may rise up at renewal.
This may or may not have to do with your personal factors. Insurance carriers take into account inflation and external factors like crash or theft rates to calculate premiums every year.
In addition, if you have a claims history or your credit score went down during the policy period, chances are that your insurance rates will be increased.
That’s why it’s important to shop around for better rates if you feel that the hike isn’t justified. By seeking quotes from multiple insurers, you can reduce your premiums.
– Auto Insurance Renewal Discounts
Renewals are a good opportunity to get discounts from your insurance provider. Even if you aren’t aware of what types of discounts are available, keep asking your agent for anything new that comes up.
For instance, there are providers who offer discounts if you prepay your six- or 12-month premium at the beginning of the policy period. Here are some discounts that you may get on renewal, so don’t forget to ask:
- Discounts on completing a defensive driving course
- Multi-policy discount
- Excellent credit score discount
- Low mileage discounts
- Loyalty discounts
- Multiple car discounts
- Clean driving record discounts
- Prepayment discounts
If you want to understand how these discounts work, you can watch this informative video:
– Grace Period For Auto Insurance Renewal
In case you are unsure about renewing auto insurance or unable to pay your premium, most insurance companies offer a grace period of five days after the expiration date to renew your policy.
If you don’t renew during this grace period, your insurance policy might be canceled.
A gap in coverage might lead to a rise in your future premiums, not to mention it is illegal to drive without insurance coverage. Also, not all insurance providers or states offer a grace period for premium payment.
– What if You Don’t Renew Your Policy?
You may choose not to renew your policy due to various reasons, but if you go without coverage for even a day, it can lead to a penalty as per the state laws.
Though your rates will not increase significantly if you were out of coverage for a day or two, it will surely impact your premiums if you are without coverage for two to four weeks.
Also, car insurance companies offer discounts to their loyal, continuous customers which you might miss if you choose to not renew your auto policy.
Canceling Your Auto Insurance Policy
To cancel your policy, you just need to follow the cancellation process of your insurance provider. Do not stop your premium payment and wait for your insurance company to cancel your policy.
That’s not a wise way of canceling your policy, no matter how unhappy you are with your insurer, because other insurance providers would take that cancellation as a red flag even if you have a stellar record.
– Cancellation Process of the Leading Insurance Providers
Most of the providers let policyholders cancel their policy online or by calling an agent. It might vary from one provider to another. Therefore, check the process before its too late to cancel.
You can see below the cancellation process of leading auto insurance providers. To cancel a policy, most insurers allow policyholders to do it over a call, through the mail, or in person.
|Insurance Providers||Cancellation Process|
|State Farm Mutual Automobile Insurance||You can connect with your local state farm agent to cancel your policy. You can also mail a letter to: State Farm Insurance, One State Farm Plaza, Bloomington, IL 1710 or fax to 888-633-0405 or 905-750-5002.|
|Liberty Mutual||You can call the customer care at 1-800-658-9857 to get help with cancellation|
|Progressive Corp.||You can call Progressive at 1-800-776-4737 to cancel your policy|
|Allstate Corp.||You can call your Allstate agent to cancel your policy who may ask you for a written request|
|Travelers Companies Inc.||You can call the customer care at 800-842-5075 to cancel your policy|
|USAA Insurance Group||You can call USAA at 800–531–8722 and request cancellation. You can also write to USAA, 9800 Fredricksburg Rd, San Antonio, TX 78288|
|Farmers Insurance Group of Companies||You can call the customer service 1-888-327-6335 to cancel your policy|
|Nationwide Mutual Group||You can call their member services at 800-882-2822 or write a mail to One Nationwide Plaza, 1 West Nationwide Boulevard, Columbus, OH 43215|
Information you will need to cancel your policy:
- Policy number
- Personal details such as name, date of birth, and social security number
- Your new insurance details
Do you have to pay any auto insurance cancellation fee?
Usually, insurance carriers do not charge any fee if you want to cancel your policy, but you should check by calling an agent beforehand. Many insurers may even refund the pro-rated premiums if you’re canceling a policy mid-term.
– Canceling Policy When You Aren’t Using Your Car
As long as you own a car that’s registered, you will need to maintain car insurance coverage in most states. Even if your car is parked in a garage, you have to keep your insurance.
To save on premiums, you can choose the state minimum liability coverage. It’s advisable to also keep comprehensive insurance in place to protect the car from any damages out of your control.
– Canceling Policy After the Sale of Your Car
Once the sale transaction of your car is through, you should ideally cancel the coverage on your policy. If you have the same policy for multiple cars, you should approach your provider about taking the sold car off the policy.
What if you are replacing your old car with a new one?
If you’re just selling your car to buy a new one, it’s advisable to continue your policy and simply switch the vehicle details. When you continue your policy, you will also maintain coverage with the same insurer who will offer you loyalty discounts in the long run.
Make sure you cancel your car’s registration and take the plates off your car after a sale. You might be held responsible for an accident if the new owner drives with your registration and plates.
– Can Your Insurance Provider Cancel Your Policy?
Insurance carriers assess the risk involved with each policyholder to determine if they should be provided coverage. If their risk assessment signals something that might lead to non-payment in the future or frequent claims, they will likely cancel your coverage.
Nonetheless, they must discuss non-renewal with a policyholder about 45 – 60 days before the cancellation.
What situations can trigger an insurance provider canceling your policy?
- Frequent non-payment of premiums
- Multiple claims in the recent past
- Criminal record
- A material change in risk
If you think your policy was canceled because you’re a high-risk customer, then it will likely be difficult for you to get coverage in the voluntary market.
Every state offers a high-risk insurance plan to provide coverage to those unable to obtain insurance elsewhere, so you can consider applying to these programs. This way, you’ll be insured and can drive legally.
– Moving to A New State
Any move to a new state is filled with a lot of excitement — you plan tons of activities and sightseeing after your move.
But you also have to think about your car’s registration and insurance coverage to meet the legal requirements in your new state.
– Regulations for Updating Your Policy After Moving
There are two scenarios that can happen when you move — your car insurance provider may not write coverage for motorists in your new state or the coverage requirement is different from your previous state.
In both these scenarios, you will have to update your car insurance policy to legally drive in the new state.
In addition, you must update your registration and driver’s license as per the law of your new state — most states require motorists to update these within 30 days of establishing residence.
If you’re moving to a no-fault state from an at-fault state, the coverage requirements are different. In no-fault states, motorists are required to get Personal Injury Protection along with liability coverage to claim expenses in an accident, irrespective of damage.
The following states follow the no-fault system for car injury claims:
- District of Columbia
- New Jersey
- New York
- North Dakota
If you’re moving to one of these states, your car insurance coverage should be updated.
If you’re just driving to another state, your car insurance policy will cover you. On a permanent move to another state, you must update your policy. You can call your agent to see if your insurance carrier offers coverage where you’re moving and ask them to update the same.
However, moving is a good opportunity to seek quotes from multiple insurers so you can get the best rates.
– Impact of Moving on Car Insurance Premiums
Your car insurance premiums may or may not rise when you move to a new state. It completely depends on factors like where you’re planning to live, what’s the theft rate in your new city, or how many fatal crashes take place close to your new home.
That’s why it’s important to shop around, because your current provider may not offer you the best rates. Local providers might offer you lower rates than some other carriers.
If you’re moving, you can start comparison shopping today using our FREE online tool. Enter your zip code below to get started!
We hope this article helped you to understand how you have to manage your auto policies and when it is time to seek quotes for a better rate or value.