A car insurance policy is one of those things you might not think about until you have to, and by then, you may be in a difficult situation.
Dealing with insurance companies after a car accident is challenging enough with a good company and a comprehensive policy. If you don’t have those things, it can be a nightmare.
If you got a new car, you’re not happy with your current policy or you want to save money, the following are some things to consider before you switch your car insurance.
How Much Car Insurance Do You Need?
If you did just get a new car or you’re considering buying one, or perhaps you’re moving to a new state with different car insurance laws, you might be wondering how much coverage you need.
The amount of car insurance you need depends on factors including the value of your vehicle, where you live, your driving habits, and your financial situation.
Nearly every state has minimum requirements, except New Hampshire and Virginia. In those states, while there are no minimum coverage requirements, drivers have to pay for the damage they cause.
Liability coverage covers the property damage or injuries you do to another driver. It’s the only coverage you’re required to have in 31 states. Then, in 17 states, you should have something else in addition to liability coverage, such as personal injury protection or uninsured motorist coverage.
So beyond what your state requires, ask yourself what type of car you drive as you determine the amount of coverage you need. Your annual collision premium may be 10% of the value of your car, so in that case, you might want to cut back on your coverage. Insurance will only cover up to your car’s cash value.
You might consider Personal Injury Protection or PIP which covers medical costs for your passengers and yourself if you’re in an accident.
There’s MedPay, which is similar to PIP but can be used for claims regardless of who’s at fault in the accident. Uninsured or underinsured motorist coverage helps if you’re hit by a driver who doesn’t have insurance, you’re part of a hit and run, or you’re in an accident with someone who doesn’t have enough coverage to pay for all the damage.
Why Would You Switch Companies?
If you already have car insurance, why would you switch?
The biggest reason is if you want to find a better price than what you currently get.
In addition to price comparison shopping, you might also want to think about whether or not something in your life is changing that could mean you rethink your current insurance company or coverage. For example, are you getting married or adding a teen driver?
It could be that your current company offers the most competitive rate for single drivers, but for a married couple, you find a better deal elsewhere.
If you’ve been in an accident or you’ve gotten a ticket for something, and your rates went up, you can check with your current company and others every six months to see if you can get a lower rate. Your rates should gradually decrease.
It doesn’t matter if you have an open insurance claim—you can still switch companies without a penalty. With that being said, until that claim is closed out, you’ll have to work with both companies, which could be inconvenient.
What to Know If You Do Switch Companies
If you do think that it’s best to switch companies, then there are some things to keep in mind.
First, when you’re gathering quotes from other companies, you should consider whether or not the value of your older car has gone down enough that you could take the collision coverage off your policy. At the same time, do you drive a lot at night to the point you might want to up your liability coverage?
Does your new car have the capability for telematic driving tracking, so that you might be able to secure discounts from other insurers?
If you’ve made price comparisons and you think you found a better price, you may be able to call your current company and they might match the quote.
If not and you decide to switch, you need to speak with your current company about their process for cancellation.
Avoid These Mistakes
If you do switch policies, then remember the following mistakes so you can avoid them:
- Don’t jump into an agreement with a car insurance company on a new quote without first making sure you’re clear on the details. You need to know what you’re getting because that lower rate may mean less coverage. You might find that you ultimately have to add coverage to a new policy if it’s not sufficient, that’ll probably cost more than your original policy.
- As you’re shopping or settling on a new policy, compare the features that you have under your current policy with what’s offered on your new one to give you a better idea of any gaps that may exist.
- Your new policy needs to be set up to start right after the official end of your old one. Otherwise, you’d have a coverage gap. If you have a coverage gap and you get in a crash during that time, you have no insurance to cover the damages and you may have to pay more when you get new insurance if insurers see a gap in coverage.
- You need to make sure that you cancel your old policy explicitly and don’t just stop paying your bills. If you don’t make payments and the old company keeps billing you, it could negatively affect your credit score.
Finally, if you switch companies, you may be eligible for a refund if you paid for that policy upfront. You should get a refund for coverage you won’t be using, so don’t miss out on that if you switch companies.
There are situations where it can make smart financial sense to get a new car insurance company, including if you get a new car.
