Frugal Living

Easy Steps to Switch Car Insurance Policy

Car insurance is like any other subscription; they offer benefits as long as you keep making a recurring payment. Since there is no permanent lock-in with the vehicle insurance company, anyone can switch to other car insurance once their policy period is over, which usually is one year. There are so many reasons why you’d want to choose another car insurance company. Whatever be the reason, switching car insurance is very easy, but you must know some basics before you make the move. Here are some easy steps to switch car insurance policies.

Canceling and Starting Policies

The switch from one auto insurance to another is seamless, but only if done the right way. If not, it can cause some serious legal and financial issues. Since you already have one insurance policy, it is important to contact your current insurer and let them know that you’ll be switching policies, and hence, their policy is not needed anymore. This would initiate paperwork if needed, and other formalities.

The other important thing to note here is that you should always start your new insurance policy before you cancel the previous one. It is where many people end up in a dangerous “gap”. So let’s say that you switch from one policy to another. Before your new policy is effective, you’ve already canceled the previous one.

Policies have an effective date (either effective immediately or on a date). So if you drive during the gap period, uninsured, it is not only illegal in almost every state in the US but also very dangerous. Getting in an accident could lead you to so much debt, you’d be bankrupt. So don’t make this simple mistake. First, initiate your new policy and only then cancel your current one.

So visit your auto insurer’s website or contact their customer service to know the procedure of canceling and switching from one policy to another. Inquire for the terms and conditions and any charges that might be applicable. Cancellation of policy is usually available in all major auto insurance companies such as Geico, All-State, USAA, State Farm

Choose Better Policy

Since you are switching auto insurance policies, use this opportunity to get a better, cheaper one. Compare all the policies from different companies and choose the one that provides the perfect coverage at the best price. Do not stick to an insurance agent and friends’ recommendations. The internet is a wonderful place to find the cheapest car insurance providers and it only takes a few minutes of search to find great policies.

It would be great to perhaps cut down on some of the policies that you might not need. For example, if your car is older than ten years, then maybe skip the collision or comprehensive insurance coverage as it would be cheaper and easier to get it fixed at your local garage (or even yourself) than paying deductibles and making a claim (which affects your future insurance policy rates)

Notify Your Lease/Loan Company

If you bought your car on lease or a loan that requires recurring payments, then remember that the car is still not yours. Not until you make the complete payment. So it is very important to notify the leasing company or the loan company (which could be a bank as well) about the switch.

Almost all the leasing companies require you to have a collision and comprehensive coverage as long as you have not completed the payment for the vehicle. So you cannot skip these two policies.

A pro tip for this case would be getting gap insurance as well if the amount you owe to the leasing company is more than the value of the car. Gap insurance covers the amount that is to be paid to the company. For example, if the current value of the car is $15,000 and the amount you owe to the company is $20,000, in the case of an accident, the insurance company would only cover $15,000 if the car is totaled. So who pays the $5,000? You!

Gap insurance will cover the extra cost. So get one for your new car and have it till the debt is paid, and then you can drop the policy. Trust us, it could save you from a lot of financial trouble.

Get the Insurance Details

Carrying the insurance details is very important. If you are asked to pull over by a cop who is already having a bad day, things could get ugly. Most vehicle insurance companies offer some form of a digital card that shows the validity of your car insurance, or in some places, physical cards are still being used. Whatever be the proof of the auto insurance, make sure to have it on you.

Why Make a Switch?

There could be many reasons to want to make a switch. The first and most common reason is getting a better and cheaper policy. Always be on the lookout for a better policy with coverage that suits your needs. New, better, and cheaper auto insurance policies keep popping on the market, grab them whenever you can.

Another reason why people switch from one auto insurance to another is a bad experience. You cannot know how an insurance company is until you make a claim. It is only then you realize the shortcomings of the company and decide to leave it for good.

We’d advise you not to leave your current policy without any reason, as you could lose the accumulated no claim bonuses which could get you great discounts when you renew your policy.

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