Is There Any Benefit to Switching Car Insurance Policies?

How and why you should change your car insurance policy

The days of sticking with one insurer for life are over. Online car insurance comparison sites make it easy to look at more options than ever before, while rapidly changing premiums and competition in the insurance market have gotten buyers into the habit of constantly shopping around for a better option.

If you’re not happy with your current car insurance provider, there may be a more suitable offer elsewhere.

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How do I switch car insurance companies?

Keep the following in mind when making a switch:

  • Know when to switch. Timing matters when switching insurers. The best time to do it is when your current policy is coming up for renewal, as this will get you the most value out of your old policy and won’t incur cancellation fees. Make sure your new policy starts as soon as possible after the old one runs out to avoid going without insurance. Simply cancel your policy rather than renew it when the time comes, and take out a new a new policy somewhere else instead.
  • Have a new policy ready. Don’t cancel your insurance until you have found a replacement. Compare different car insurance policies online to review other insurers and levels of cover.
  • Know how to cancel. You must notify your current insurer, usually in writing, that you will not be renewing your old policy. Read the product disclosure statement or contact the insurance company to familiarise yourself with the cancellation process and know how long it takes.

With these three things in place, you can switch policies while minimising the amount of time you spend without insurance. After this, actually making the switch is easy.

Step by step guide to changing car insurance companies

  • Decide you want to look at other options. Whether you feel like your premiums are too high, your cover is insufficient or that your car insurance just isn’t right for any other reason, deciding to look around is the first step.
  • Compare car insurance online to find a new policy that’s right for you.
  • Examine your current policy and the new policy side by side and work out how much you can save.
  • Decide when you want to make the switch. You can time it to take advantage of any discounts from your new company and to minimise any fees from your old one. Most importantly, you want to make sure you aren’t left without any car insurance for too long.
  • If you want to switch car insurance mid-policy, check for cancellation fees and similar conditions in your old policy
  • Cancel your old policy and sign up for the new one. Insurance policies are usually cancelled from when the company receives notice in writing, while a new policy will take effect on a start date designated by the insurer. Ideally both will be on the same day.
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Why should I switch insurers?

There are many reasons why you may want to switch insurers.

  • Are you unhappy with the current level of service? Common issues with service include too little or too much communication, problems when making a claim, unhelpful customer support or difficulties with offshore call centres.
  • Do you want better value for money? It's important to reassess your needs each year when you renew your policy. Your insurance may have been great value for money when you first got it, but premiums and circumstances change and this may no longer be the case.
  • Have your circumstances changed? Maybe you have a new young driver raising your premiums, you’ve moved to an area with a higher or lower crime rate or you have a different source of income now. A lot of things will affect insurance costs and needs, so changing car insurance policies is a good way to adapt and find better prices.
  • Are you eligible for discounts? You may now be eligible for discounts that your current insurer doesn’t offer. These could be multi-policy discounts for getting multiple products from the same insurer, freebies that come with a new policy, periodic bargains or anything else that looks tempting.
  • Is your current policy the cheapest on the market? It may be as simple as that. New brands enter the market all the time, and offering low prices is a great way for them to steal customers away. Letting yourself get stolen by a competitor might lead you to a great deal.

Even if you feel like none of the above applies to you, it’s still worth comparing car insurance providers. There are a lot of companies in the marketplace and there’s usually at least one that has a better deal for you.

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Tips for changing car insurance

  • Is the switch going to be worth your while? Make sure it’s worth the effort by looking at how much you could save versus the administration and cancellation fees you may be charged. If you’re only saving a couple of dollars on your premium, you might be better off staying with your current insurer until renewal time.
  • When is your new policy’s activation date? Check the activation date on your new policy and make sure it is before your old policy expires.
  • When should I cancel my old policy? Cancel your old policy at the end of a payment cycle, so that you don’t have to worry about chasing any refund owed to you.
  • Should I change insurer every year? Unless it’s getting you a good discount, loyalty is overrated. If you can find a better deal with another insurer, let your current insurer know and see if they are willing to match it. If not, make the change. Other than the hassle and loss of loyalty discounts there’s no reason not to switch car insurance every year.
  • Is the cheapest policy the best for me? Don’t base your reason for switching on price alone. Make sure any new policy you look at offers the right cover as well. A cheaper policy might be problematic if it’s not as good as your old one.
  • Should I review my cover each year? Yes. Make it a habit to review your car insurance every year before renewal time. You will often see premium increases at this time, as insurers usually count on customers renewing their policy automatically each year without comparing other options.
  • I have car insurance already, will it cover my new car? Unfortunately you need to take out a new policy for a new vehicle. However, if you wish to take out cover with your current insurer rather than switching to a new provider, you may be able to secure a discount.
  • Should I switch policies after having an accident? Be careful about switching car insurance policies after an accident. Your claims history is available to your new insurer, meaning you won’t get a clean slate by switching car insurance.
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Can switching policies save me money?

You know it. Being able to go online and compare car insurers means that you can save a lot of money by playing the field. If your current insurer won't offer you a better deal or match a quote you've found, then tell them you’re thinking about switching car insurance policies. If that doesn't prompt them to offer you a better deal, then it's time to go. Other ways you can save money include:

  • Reviewing your current level of cover. Reviewing your current level of cover is a great way to save some cash. If you have kids under 25 or you yourself were recently under 25 and have not yet updated your policy, you could be overspending on your insurance. Your car itself may be overvalued on your current policy (ie the replacement value of your car may have decreased), so making sure your details are up-to-date will help you avoid paying too much.
  • Knowing the different cover options. When you're switching car insurance policies, it’s important to understand the options available to you. Choosing a higher excess, for example, will lower your premiums. Being protected against reasonable hazards and making constructive claims for damage is how you get the most out of your car insurance policy, rather than always going for the cheapest option.
  • Do you review your cover every year? If the answer is no then you could be wasting hundreds of dollars each year. Always check how your policy compares to others in the market.
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What isn't my insurer telling me?

Knowing how the industry operates can help you in your search for a better deal. The following are some of the things that your insurer won’t necessarily tell you, but that are useful to know.

  • Insurers share information amongst themselves, so don’t lie about your claims history or driving record.
  • Insurers calculate the replacement value of your car based on the cheapest quote they can find, so if you are unhappy with their valuation, get quotes from 3 different dealers yourself and submit them to your insurer.
  • Personal items such as stereo systems aren’t usually covered by your car insurance. If stolen or damaged, try claiming them on your house and contents insurance instead.
  • To attract new customers, many insurers offer them better deals than their current customers are getting. To find out if that’s the case with your insurer, apply for a quote online as a new customer and compare it with what you are currently paying.
  • Most insurance renewal statements do not list last year’s premium amount, so make sure you look at your last renewal and compare what you were paying then with what they are asking for now.
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How do I cancel my current policy?

Cancelling your current policy should only be done once your new policy is ready to go to avoid having gaps in your cover.

  • Notify your insurer in writing.
  • Pay any cancellation or administration fees.
  • Make sure you tell your insurer you are cancelling your policy, because if you just fail to renew it without contacting them, they may consider you in default and you could end up with a black mark on your credit record.
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How do I switch car insurance mid-policy?

Some circumstances may force you to change insurers before your current policy expires. You could be changing jobs, changing locations, changing drivers, changing cars or you may have just found the deal of a lifetime and you can’t afford to wait.

Whatever the reason, if you are changing car insurance mid-policy, expect to pay a cancellation fee and also to receive a partial refund. The refunds take time however, so make sure you are not waiting on your refund to pay the premium on your new policy.

Steps to changing car insurance mid-policy

If you’re switching car insurance before your policy is over, follow these steps:

  1. Contact your current insurance provider or go through the product disclosure statement to find out what’s involved in cancelling your insurance mid-policy. You need to know how to cancel, when the cancellation takes effect, what the associated fees and costs are and whether you will get any refunds.
  2. Decide on your new policy. You should have a replacement policy that you’re happy with ready to go before cancelling your old one. Compare the savings or additional benefits of the new policy with the cancellation fees of the old one to make sure it’s worthwhile. Refunds usually take time, so don’t plan on paying for the new policy with a refund from your old one.
  3. Sign up for the new policy and then cancel the old one. If possible, try to have your new policy take effect as soon as the old one ends, without any gaps between.
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Should I renew my car insurance or switch policies?

Weigh up the pros and cons before jumping ship. On the plus side, you may get a better deal elsewhere or your current insurer may come back with a better offer. On the downside, you may lose any discounts you currently have or your no-claims bonuses may not be transferrable.

You should always try to work it out with your current insurer before making the switch. They are generally happy to extend discounts if it means keeping customers, particularly ones who have been loyal for many years and not made any claims. Give them the opportunity to match or better any new deal you have found and you may be pleasantly surprised at what they have to offer.

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