Switching Auto Insurance Providers

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How to Make the Best Switch

There could be a number of reasons you are switching auto insurance providers. Perhaps you haven't checked the market in awhile and want to see what's out there, or think you could find a better deal. Regardless of whether you are motivated to switch insurers immediately, it never hurts to do some market research. Maybe your circumstances have even changed, and your insurance needs have shifted accordingly. Even moving to a different county or state will prompt a change in insurance coverage and provider.

If you haven't thought about switching auto insurance providers, you may want to consider that your policy can be reassessed due to life changes like a new vehicle, credit changes or a new location. An often overlooked fact is that many insurance companies check credit ratings prior to pricing or approving a policy. It is also legal for insurance companies to do so without obtaining your permission. Insurance companies can also assign you an industry 'credit score' that is based upon your credit rating, history and other related factors. Insurance companies have demonstrated a correlation between financial responsibility and insurance losses, and will price policies accordingly. If you have a good measure of financial responsibility, you are seen to be more responsible in driving as well. This would mean that consumers showing less financial responsibility would be prone to file more claims, and would be required to pay more.

Both Federal and State Fair Credit Reporting Acts (FCRA) state that insurance companies are allowed to view credit information for underwriting purposes (determining your policy) without your permission. The federal law can be located at www.ftc.gov and the state law is documented at RCW Chapter 19.182 at www.leg.wa.gov/rcw. You can also ask your insurance company or prospective insurance company about this practice. They are legally required to tell you if you ask. Also, be aware that if you are adding any members to your policy, it is possible that they would be checked as well. Make sure that you inquire about this practice and inform anyone who is named on your policy.

It is not as difficult as it may seem to change insurance providers. Having existing coverage makes it even easier for the new provider to create your policy since you have established a record. First, you should cancel your existing policy. Even if it's not required, it's a good idea to do this in writing. Be specific about the date you would like the policy to be cancelled. After this point, the old insurance will no longer be effective. Some people try to coordinate this with the end date on their policy payments so there isn't any overlap. If there is a difference, you should ask your insurer about reimbursement for the partial term. You also need to make sure your new policy is going to be effective at this date. Some states require that your new insurance agent notifies your previous agent of the change. Ask your new agent, as they should be willing to earn your business by helping you with information. It may be necessary to return the original printed policy, depending on the insurance company.

Aside from a few small variations, your previous insurance company should send you a cancellation request form, in which you should sign and return. If you do not receive this, be sure to contact the insurance company to verify the status of your cancellation. A good reason for properly cancelling your policy is to ensure coverage is terminated so it will not damage your credit. If the insurer reports your policy as cancelled due to non-payment, it could adversely affect your credit.

Also, check your policy for any penalties. Depending upon your length of contract or policyholding, you could be liable for an early cancellation fee. Don't be surprised. Many insurers will not refund the total amount of your premium if you cancel early, but you should inquire to be sure. If you decide to switch companies when you are due to renew an existing policy, make sure the new insurance company has your policy effective at that date.