Top Tips: The Best Times to Switch Your Auto Insurance for Maximum Savings
KEY POINTS
- Car insurance rates are up 19% versus a year ago.
- Some, but not all, insurers offer loyalty discounts -- but loyalty could also cost you.
- The best time to save is when there's been a change to your personal circumstances.
A lot of Americans are grappling with soaring auto insurance costs. As of November 2023, car insurance costs were up about 19% compared to a year ago.
Sometimes switching insurers can help you save money, but it's not a sure thing. Keep reading to learn about when the best times are to switch car insurance companies and some other ways to maximize your savings.
When is the best time to switch auto insurance?
Unlike with health insurance, you can change your auto insurance policy at any time, even mid-policy. Some insurers charge a cancellation fee, so make sure to check with your insurance company if you're contemplating a switch.
In general, there's no best time of year to shop for car insurance. The best times to switch auto insurance are usually more about changes to your circumstances (more on these in the next section) than the time of year. That said, it's usually a good idea to compare quotes every six months to a year to make sure you're getting a competitive rate.
Five times you should shop for car insurance quotes
Here are a few times you should always obtain auto insurance quotes to see if you're eligible for discounts:
- You got married: Insurers generally view married people as less risky drivers compared to singletons, so consider getting a new quote if you tie the knot. You may also score discounts if you combine car insurance.
- You've moved: If you bought a home or signed a new lease, you may be able to save money by bundling auto insurance with your rental or homeowners policy. Even if you're not on the market for a new policy, you'll need to tell your insurer that you've moved. Insurers consider your ZIP code's rates of theft, vandalism, and car crashes in setting your rates, as well as the length of your commute. You can stick with the same policy if you're moving in-state, but if you're moving out of state, you'll need a new policy even if you stick with the same carrier.
- You no longer commute: If you're no longer commuting -- whether it's because you've retired, you now work from home, or some other reason -- it pays to shop for new coverage. Driving fewer miles usually means you're at less risk for an accident, so you may qualify for a discount. One option to explore is pay-per-mile car insurance, which charges you based on how much you actually drive.
- You've celebrated a big birthday: A plethora of factors determine your insurance rates, so don't assume that your rates will increase or decrease at a given age. Though it's widely reported that your car insurance drops at age 25, drivers actually see steeper drops between ages 19 and 25. Still, if you've maintained a good driving history and you don't think you're getting proper credit for your maturity, it's time to compare auto insurance quotes.
- There's been an improvement to your credit reports or driving history: If you were at fault in an accident, many insurers will charge you higher premiums for three to five years. By some estimates, drivers with bad credit can pay up to double what those with exceptional credit pay for car insurance. If significant time has elapsed since you had a moving violation or you've made significant improvements to your credit, it's worth comparing quotes.
Note that some insurers offer a loyalty discount to longtime customers. On the flip side, some insurers use what's called price optimization, where they may charge more to policyholders if they think they're unlikely to switch carriers in response to a rate increase -- though some states have banned this practice.
What to do if you find a better quote
Found a better quote? Congrats! But there are a few things you need to do before making a switch.
For starters, make sure your new insurance coverage will be comparable to your existing coverage. This isn't just about your premiums. Also, compare your coverages, including the limits, and your deductibles. Sometimes increasing the deductible can be a good way to save on auto insurance if your emergency fund is healthy. But be cautious about reducing your liability coverage, as doing so can leave you financially vulnerable.
If you're still satisfied with the new coverage, get proof of your new coverage before you cancel your existing policy. If your car is financed, you'll need to provide your lender with proof of coverage.
Once your new coverage takes effect and you've gotten a letter of cancellation from your previous insurer, drive forth and enjoy the savings ahead.
Our Research Expert
Robin Hartill, CFP®, is Motley Fool Money’s Head of Product Ratings and has worked for The Motley Fool since 2020. Her work has appeared in various national publications, including NerdWallet and CNET Money. She previously wrote The Penny Hoarder’s syndicated “Dear Penny” personal finance advice column. She is based in St. Petersburg, Florida.
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