Your Auto Policy: Things to Consider Before You Cancel Early
If you’re unhappy with your rate or some other aspect of your car insurance policy, changing insurance providers is always an option. Before you make the switch though, there are a few factors to consider, including how much it might cost.
Sometimes, there are financial penalties for early cancellation. Consider all costs before you cancel early.
Don’t let your policy lapse without payment
While it might sound easier to simply stop paying your premium, that will probably hurt you in the long run. While the insurance company will end up cancelling your policy, future companies may also identify you as a high-risk client. As a result, your new provider may charge you a higher premium to account for the added risk. It’s a better idea to properly cancel your current policy and pay any necessary fees.
From an insurance company’s perspective, early cancellation involves administrative costs as well as the loss of the monthly premium. Insurance companies rate their premiums based on the full term of coverage, which is usually a year. Each company has unique rules and fees regarding cancellations, so be sure to read your policy or ask your broker for the exact information.
Before you cancel, find out how much money you stand to lose. You’ll need this information to determine whether the savings on a new policy makes up for that difference.
Starting a new policy: fees and down payments
Some insurance companies may require a down payment. Therefore, in addition to any money you might lose on the cancellation of the old policy, you’ll have to pay these costs up-front. Make sure to do your research so any fees or down payments don’t come as a surprise.
Make sure to prevent gaps in coverage
When changing car insurance providers, make sure you don’t end up with a gap in coverage after you cancel your old policy and before your new policy begins. A period where you’re uninsured can lead to other insurance providers raising your premium down the road.
When to shop for car insurance
Shopping around for car insurance when your policy renewal date is approaching is usually the best time and will help you avoid cancellation penalties. Cancelling on renewal gives you a smooth transition into the new policy.
However, if you’re unhappy with your current rate or policy, start shopping around for quotes right away. Comparing rates will tell you if you’re overpaying, and by how much.
To find out whether you’ll save money, you’ll need to calculate how much you will save over the policy term on premiums alone. Then, subtract from that the costs of early cancellation. If you still come out ahead, then cancelling may be the right choice.
When shopping around for car insurance, there’s no obligation to buy, and looking at quotes won’t cost you anything. The brokers and CSRs at DPM Insurance Group are pleased to assist existing and potentially new clients to explore these options. It’s a good way to stay informed about what other companies are charging and make sure you aren’t paying more than you should be.