Right Way and Wrong Way to Cancel Auto Insurance Policies when Switching Companies

​It’s always a great idea to shop around for a cheaper rate on your auto insurance policies. Financial advisers recommend that you do it at least every two years. But what do you do next if you find an auto insurance company that has a lower rate than the one you’re currently paying? It’s very easy to change auto insurance companies from one company to another. But there is a right way and a wrong way to do it.


     Doing it the wrong way can lead to some big headaches in the future! There are only few key steps here that you need to be aware of, but it’s very important that you know them. Understanding the key steps below will keep things rolling smooth, and prevent you from having big problems later.


Be sure you are comparing apples to apples.


     It is very important for you to compare another auto insurance company’s rates with the same exact coverage (if not better) than what you already have now.  If you don’t exactly what coverage you currently have, it’s impossible for another agent to compare apples to apples. Any auto insurance company can beat a rate if the coverage is gutted. Comparing auto insurance rates will do no good if you’re not comparing them with at the same levels of coverage as what you have now:

• Be aware of what current liability coverage you’re carrying.

• Also look at uninsured motorist and medical coverage to make sure they match up as well. 

 

• If you have comprehensive and collision coverage on your vehicle(s), make sure you have the same deductible.

Things to keep in mind after you have decided to switch auto insurance companies.

• Watch for under-lapping dates by one day.

     Remember that once a cancellation or expiration of a policy occurs, the cancellation or expiration takes effect at 12:01 AM with most companies.  Many people get confused by this.  Don’t cancel your old policy until you’re 100% sure that your new policy has gone into effect.

• SR22 Filings

For those of you who need an SR22 filing, I recommend at least a one day overlap. License bureaus can take time to process SR22’s. You definitely don’t want any underlap with an SR22 filing, or you license could be suspended.

• Upgrading

Before you close the deal on your new auto insurance policy, it’s always a great idea to inquire on how much more a higher level of coverage costs vs. the coverage you’re about to choose. Many of you will be very surprised!

• Doubling your level of liability coverage can sometimes run less than $5 a month. Quadrupling your coverage can sometimes run less than $10 a month.

• Also look at uninsured motorist and medical coverage to see what the next higher level of coverage costs.

 

• If you have comprehensive and collision coverage on your vehicle(s), check on how much more a lower deductible would cost (a deductible is your out of pocket expense if you have to file a claim).

In the end, YOU make the decision to accept or pass on better levels of coverage. But accepting lower levels of coverage without comparing the prices for higher levels is a big mistake!

If you’ve only had auto insurance coverage for less than six months:


If at all possible, you’re much better off waiting until you’ve had continuous coverage for at least six months before you shop around with another auto insurance company. WHY? Because once you have had continuous coverage for six months, auto insurance companies will offer you a very significant discount.




IF YOU CHANGE AUTO INSURANCE POLICIES BEFORE YOUR OLD POLICY EXPIRES, BE SURE TO CANCEL THE OLD POLICY PROPERLY!


     I put that in all caps for a reason. A lot of people screw up on this! Leaving an old policy when it expires is ok. But be careful cancelling a policy in the middle of a policy period. Make damn sure you initiate the cancellation! Usually, all it takes is a two minute phone call to your agent. You may need to sign or E-sign a cancellation document, but that’s about as hard as it gets.


     What you don’t want to do is simply let the old policy lapse for non-payment. Many people make this mistake. Once they pay a down payment on their new policy, they simply forget or ignore the old policy, and let it cancel on its own for non-payment….. This is a terrible mistake!  Many auto insurance companies would will not only bill you for this, but many companies also send it to a collections agency and report it on your credit report.  This can’t screw up your credit score for a long time!




Summary:


     It’s always a good idea to shop around for a better rate on auto insurance. Just be sure to keep the above things in mind. Doing the little things here goes a long way in making sure you’re not sacrificing better coverage for a lower rate. And if you’re switching companies while currently in the middle of a policy period, be sure follow through with the recommendations above, so that creditors won’t chase after you. Just doing the little things can make all the difference in the world.




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