Switching Auto Insurance Providers: The Pros And Cons Explained

Chances are pretty high that, if you're reading this, you've got auto insurance. Chances are also pretty high that you think you're spending a bit more than you should be on it. You're not alone — insurance premiums have been steadily rising for the past couple of years across the whole country. Higher prices on new cars, more tech, and more expensive repairs all contribute to the problem of rising auto insurance rates. 

What's a person to do? Well, switching auto insurance providers is one way to get yourself a lower premium, often for identical or nearly identical coverage. When people switch auto insurance it's often because the new company has discounts the old one just doesn't offer, or is running promotions to win over new customers. Sometimes a review of the kinds of coverage you're paying for, and what you're actually using, can reveal places to find savings too. Of course, great rewards frequently have some challenges baked in. 

Switching auto insurance providers can be a quick and easy process, but there are some pros and cons to consider before you make the jump. Let's get into it!

This is the headliner, and it's pretty obvious: you can save money by switching your auto insurance provider! Really, though, you don't have to switch providers to save money — you could reduce the amount of coverage you have, increase your deductible, or skip some of the add-ons like a lower glass deductible or rental car coverage. 

However, once you're signed up with an insurance provider, you may find yourself in the conundrum of reducing coverage to reduce cost. Quick wins can be found with a current company by skipping seldom-used add-ons, but longer-term changes to the factors that have a bigger impact on your premium can move at a slow pace. Waiting for a ticket or accident to fall off your driving record can take years, depending on local regulations and your particular company's policy. That's why people shop around.

Many companies offer new customers deals and discounts to entice them to move from a competitor. Be sure to get quotes not only for auto, but for bundles that the company offers, as some significantly discount their premiums when a customer also purchases renters or homeowners insurance. Some auto insurance companies may also offer lower premiums with programs not offered at your current insurer, like discounts for safe driving when you allow them to monitor your habits with an app or device that attaches to your car.

Yep, there are a few downsides to consider when you are hoping to save money by switching your auto insurance provider. Perhaps the first one to plan for is the fact that you need money to save money. 

Zero money down auto insurance isn't a thing, so you'll need a cash up front to start a new policy. If you've already paid your policy in full, your current auto insurer should refund you for the unused portion of your current policy, but it doesn't happen instantly. Depending on your insurer and the processing methods they prefer, you could potentially be waiting a few weeks to get that refund check. That means, unfortunately, you'll need to have some money on hand to make the switch. Think of it like renting a new apartment — you'll need to have a deposit to get moved in. 

One way to mitigate this is through monthly payment plans, which could help coordinate a changeover from one insurer to another without having to wait on a refund check. Make sure the new policy is active before you cancel the old one, otherwise you may end up flagged for a lapse in coverage. Still, if your goal is to maximize savings, you can often get a nice discount if you're willing to pay in full. What you're able to do is going to depend on your personal financial situation, so be sure to ask whether the price you're seeing is dependent on a certain payment frequency or having autopay turned on. 

Sometimes the grass really is greener on the other side of the fence! When it comes to customer service, some companies do provide better service than others. A survey from LendingTree  found that while the majority of people switched insurance providers to save money, 25% cited positive reviews of a competing insurer as a motivator to move and 20% said bad customer service at their current provider made them decide to switch. 

It isn't just a bad claims experience that encourages drivers to switch — sometimes it can be something as simple as contacting customer support. If you've been stuck arguing in circles with a chatbot to get an answer to a question just outside its scripted responses, know that you're not alone in your desire to find a new auto insurance company. 

One way to change the experience you have with your insurance provider is to consider not only the company you insure with but also the agent who represents it. According to JD Power, nearly half of all new auto insurance policies are being purchased online, and many major insurers allow individuals to purchase a policy directly without going through an agent. 

Buying directly or through an agent doesn't necessarily increase the cost of insurance, so the decision to go through an agent is ultimately a matter of personal preference. If you want to be able to call, text, email, or drop by an office to ask a question, having an insurance agent can make your customer service experience a lot more personalized. 

Shopping around sucks. Even when you have a fantastic app, given the amount of information that a company needs to give you an accurate quote, you're doing a bit of repetitive work to get comparative quotes. You'll want to get the difficult-to-type information saved to a digital note so you can do some copying and pasting and make your life a little bit easier. Then you need to be really diligent when comparing your current coverage to the new one. The big ticket stuff is easy to see: coverage limits, deductible, term length. Make sure to dig into the details of optional add-ons, like rental car coverage, a smaller deductible for glass replacement, or roadside assistance.

One huge time and effort saver here is to make your insurance agent do the cross shopping, if you have an independent one. Some agents are locked into a single provider, but others have a range of insurance companies they can sell policies for, and you can often save money having them cross shop for you. Another way to make the most of your money-saving endeavor is to ask your agent to explain your different options, and what changes will make the biggest change to the bottom line. You can even have them examine a competitor's offer, which might highlight a subtle change you hadn't noticed before.

Life changes, and sometimes your insurance needs change along with it. If you've recently moved or your commute has changed significantly, you may benefit from a specialized insurance policy with another company. Some insurers also offer a pay-per-mile model, which ties your cost to the number of miles driven per month plus a monthly base rate. If you track your mileage diligently, it should be easy to do the math to see if one of these plans could save you money.

However, the amount that you drive isn't the only factor that could qualify you for a specialized insurance plan. Some insurers offer plans that are driving-based. These programs offer drivers discounts in exchange for monitoring their driving habits in some way. This can be great if you're a cautious and safe driver looking to save money. However, keep in mind that monitoring your driving habits may lead to an increase in your premium if you frequently engage in risky behavior or habits, like driving late at night or regularly slamming on your brakes.

Remember, if the company you're with doesn't offer the kinds of insurance you want, you've got a long list of places you can consider. So how can you know what you're missing? Instead of puzzling over trying to figure out what you don't know, you can learn more about what's available by shopping around regularly. How often should you compare auto insurance? Consider shopping around at least every year, if not sooner. Many policies run for 12 months, but some run for 6 months. Ideally, take a look at prices when your insurer sends your policy renewal. You know, the letter that usually comes with a price hike.

There's one area that you should pay close attention to when switching your auto insurance provider: hiccups and administrative blunders. What do we mean? Something as simple as a date mix-up when you cancel one policy and start another might leave you with a lapse in coverage. 

Any company can make a mistake, but it's important that you take notice when issues like this come up and do your due diligence to get the record corrected. Some insurance companies may charge you more or refuse to insure you, if you have a lapse in your coverage. You could also land in hot water with your state, depending on the laws where your policy has been issued. 

Taking the severity down a few notches, there can also be minor technical headaches when switching to a new company. You'll have to set up billing and autopay, maybe figure out a new online customer portal, and often learn how best to interact with the new company. Some have robust call centers, while others ask you to download their app to handle your policy. Some have local agents you can call or email with questions, and others will only offer interactions with agents through the app or website. Switching will always have some level of adjustment, but it's often worth the trouble for the savings it nets you.