Potential Costs Of Switching Your Auto Insurance Companies
Posted on: 30 July 2015
There are several situations in which you may want to switch your auto insurance company. Examples include if you buy a second car, want to add a driver or move to a different state. All these are situations that may affect your insurance premiums, and switching may be desirable if you can find a better offer elsewhere. However, you should do this knowing that there are two potential costs.
Cancellation Penalty
When you switch to a new insurer midterm, you are entitled to a refund of your outstanding premiums. However, an auto insurance policy is a contract, and contract cancellations often attract penalties. For this reason, your car insurer may charge you a cancellation fee.
Talk to your insurer about the cost (if any) and anything you can do to have it waived. It might also be a good idea to compare the penalty and the savings you are getting by switching to the new insurer to determine if it is worth it.
Coverage Gap
You should never drive without car insurance, even for a day. Apart from the illegality, it also exposes you to a serious financial risk; any damage that occurs within that period will be yours to shoulder. Also, it may dent your credit rating and even increase your future premiums due to your perceived risk.
Yet, this can easily happen if you don't time the cancellation of the old policy and the purchase of the new one. This is why some states have rules requiring proof of new insurance coverage before the old one can be cancelled.
Changes in Coverage
Premium rates aren't the only differences among car insurance companies. Examples of such differences include customer service and coverage limits. For example, your current coverage may include a bodily injury limit of 20/60 while the new insurer offers 25/50. The first one means that you are entitled to a maximum claim of $20,000 for each injured person and a maximum of $60,000 for everybody injured in the accident. The second offers a limit of $25,000 and $50,000 for the same injuries.
When switching insurers, there is a risk of focusing too much on the rate at the expense of these other differences. These differences are there because there are slight variations in the way insurance companies measure risks. Be sure to compare everything so that you still get what you need in your new company.
All these potential problems mean that you should be careful when switching insurers. It shouldn't be as simple as getting quotes and picking the lowest offer available. Also, it might be a good idea to wait until your renewal date before making the switch – unless you have a compelling reason not to. For more information, contact a company such as TLC Associates.
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