Switching Insurance Provider

Shopping for the best deal on insurance makes sense, because rates can vary widely from one provider to the next.

It’s smart to review your policy regularly to make sure you are getting the most for your money.  Don’t go strictly by the premium figures, though: Compare apples to apples, making sure that the rates you are comparing include the same benefits, deductibles, limits and service levels.  Also make sure that the insurance companies you are considering are reputable. Lower premiums don’t mean much if every claim you file becomes a struggle.

How do you know if and when to switch insurance providers?  And how do you make the change as painlessly as possible?  Following are questions policyholders frequently ask.

This is entirely up to you.  Some people will switch for $100 a year.  Others don’t think the effort involved in switching is worth it unless they can save several hundred dollars annually.  As you make this decision for yourself and your family, remember to factor in these considerations:  You may be saving with your current provider due to multiple-policy discounts, in other words, by having your car and home insurance with the same provider. You also might be earning discounts or perks toward your future premiums, earned accident forgiveness or renewal discounts on auto insurance, for example.  Be sure to find out if the other companies you are considering offer any of these added incentives.

Shopping around about a month before your current policy expires is generally best.  Your insurance company is likely to send you a notice three or four weeks before your expiration date to let you know your policy is about to expire; that notice should include coverage information that will make it easy for you to comparison shop online, by phone or in person.  If not, simply pull out your policy to see what coverage it includes.  This is also a good time to review any discounts your current provider is applying.

You absolutely can.  Insurance policies include a provision giving policyholders the right to cancel coverage at any time.  However, some providers charge a cancellation fee.  Find out whether your insurance company does and, if so, what the amount of the fee is.  If you would still be ahead after paying the cancellation fee, then switching mid-policy is probably the right thing to do.  If the savings you’ll enjoy by switching doesn’t cover the cost of the cancellation fee, then it’s probably best to stick with your current policy until it expires and then make the change. If you have paid for an entire coverage cycle but cancel mid-cycle, the insurance company will refund the balance to you.

Once you have a signed agreement with your new insurance provider that includes your premium costs and the date the policy goes into effect, you should inform your current insurance company in writing.  Giving a few weeks’ notice is ideal.  Make sure your cancellation letter includes your name, policy number and the date you want the policy to be cancelled (this should be the date the new policy takes effect). Be careful with this detail as you don’t want to risk not being covered even for a short period of time. Some insurance companies have a cancellation form you can fill out that includes all necessary information.  Make sure you get confirmation from the insurance company that your policy has been cancelled.

Some policyholders neglect to inform their current provider of their intent to switch.  Instead, they simply stop making payments on the old policy.  While it’s true that this will stop your coverage from being in effect, it can hurt your credit rating and make it more difficult or expensive for you to get insurance coverage in the future.  Insurance companies generally automatically renew your policy at the end of its term unless you inform them that you are making a switch, so what you consider “cancellation” is to the insurance company failure to pay.