The Cost of Switching a Contract to a More Affordable Auto Insurance Rate

There is no cost for switching a contract to a more affordable auto insurance rate; at least not in a monetary sense. It is well within your rights to change providers anytime you want. However, if you consider other factors, ultimately, you may indeed pay a price.

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Deciding to go with a different car insurance company does not entail early termination fees like cell phone contracts or satellite television agreements do. These types of agreements lock you into a specific financial obligation for the services provided. To avoid hefty penalties, you must remain a loyal customer for a certain amount of time.

Cancellation Procedure

The choices you make in terms of car insurance may very well have implications that you never considered. This is why it is important to first know auto coverage basics before you learn the service cancellation process.

Every car insurance customer has certain rights as they pertain to canceling their contract, and the rules are quite plain. For example, Florida residents can turn to the state’s Department of Insurance and review the document that points to these facts. The same is true regardless of where you reside. However, laws vary from state to state.

To change car insurance providers, you only need to provide the company with notification, either verbally or in written form, and ask for a refund for the unused portion of your premium.

The carrier must comply with your request within a specific period. For most states, the time limit is 30 days.

There is, however, a difference in this procedure for the car insurance company if they cancel a customer’s policy. This is where some people confuse the situation. If a car insurance company cancels your premium, it must provide advanced written notice and an explanation. The notification letter must give the previously insured motorist enough time to obtain coverage from another source.

Price Is Usually the Main Reason for Switching

Since you probably want to switch car insurance providers because of the price of your premium, you will likely save money. However, you must think about other things before you make up your mind.

Remember, the main reason you originally chose this company could revolve around a multitude of benefits.

Perhaps they offered you significant savings at first, but now the rate you pay is higher than you can afford. Many customers face this obstacle regularly.

You need to remind yourself that you may encounter the same dilemma with your new car insurance provider after a few years as well.

For this reason, you should weigh your options very carefully by calculating your past premiums and the rate increases over time. It’s good if you have a few policies you can review. This will give you a good idea of your average rise in price.

Determine the difference in dollar amount and percentage. While you search around for a lower rate, figure out whether you actually have more value in your old policy versus the policy with the new, cheaper quote.

You Could Stand to Lose Even if You Save

Even if you save more money with your new car insurance company, you could stand to lose more if you make the switch. This is because you may have had exceptional offers that the new carrier cannot match. They may not even utilize the same benefits.

For instance, you may have accident forgiveness with your old car insurance provider, but your new company may not participate in this program. Alternatively, they do offer the discount, but their stipulations only make it available if you are a current customer.

You could end up paying higher premiums if you have an accident, even if it is a minor one.

Another way you could pay more is by failing to verify the company’s cancellation policy. It is true that you can cancel whenever you want, but make sure they are not super-strict with their guidelines as they relate to you.

Some car insurance companies have detailed clauses that allow them to drop you after the first accident or even traffic violation. If anything derogatory appears on your driving history, they may exercise this option.

The new provider may also use a completely different rate calculation system, since every automobile insurance company has their own way of arriving at their figures.

There is no set pattern for car insurance rates and, while there are laws protecting you, they are limited.

According to the National Association of Insurance Commissioners, every state has representatives who act on behalf of their consumers by making sure the insurance companies keep their promises. They structure their process around functions like company licenses, consumer services, and financial regulation.

In other words, the state regulators only confirm that individual car insurance providers operate within the limits of these laws. They make sure they have current licenses and offer certain services based on the minimum requirements.

As for the financial regulation portion, if each carrier remains compliant and shows just cause for increasing prices, they can charge their customers any price they wish. The state representatives do not dictate or set the rates for the automobile insurance industry.

You May Sacrifice Quality

If you switch from your current car insurance company to another to save on rates, you may sacrifice quality, which decreases the value of your policy. A study on customer loyalty conducted by Bunker Hill Community College in Boston, Massachusetts, explains the importance of quality in a service environment, such as car insurance.

One of the main reasons that customers remain loyal to their current automobile carrier is because of the quality of service they receive; not the price.

The report has amazing statistics to consider. For example, a company spends approximately five times more of their revenue on advertising ploys to attract new customers than they do to retain their old customers.

In addition, the average customer who shows dissatisfaction will tell between 10 and 15 friends, relatives, and co-workers about their poor treatment.

Furthermore, 80% of all consumers switch from one company to another because of the way the customer service department handled their inquiry or complaint.

It is scary to think that you may fall into this category because you wanted to save a little extra money, but the reality remains apparent.

You may very well find sub-par service if you leave your car insurance company for another offering much lower rates. This is something only you can decide to live with.

The Dependability Factor

Having a car insurance company that you can depend on is crucial today. This is especially important when reviewing the soaring number of recorded fraudulent claims.

The Insurance Research Council reports that fraudulent claims for auto insurance accidents rose between 13% and 18% during 2007. This amount totals between $4.8 billion and $6.8 billion in payments within a one-year period.

The unfortunate result is a number of consumers with valid claims going through a rigorous process that often leads to closures or arbitration, which takes substantially longer to produce an outcome. This leads to fewer payments for those involved in automobile accidents. Although the request for compensation is surely justified, the phony claims make it much more difficult.

You must be careful when selecting an auto insurance provider based on price alone. They may not have the financial stamina to deal with this growing calamity within the industry. If you find yourself in need, you may have to jump through hoops just to get your claim processed. Still, there are no guarantees that you will receive the money you deserve.

Moving Too Quickly Can Cause Worse Problems

If you make too many swift moves, you can have worse problems than high rates. You can wind up paying more after the application process. Many people assume that as soon as they receive a quote, this finalizes the procedure and the rest is up to the customer. However, this is only one of the steps involved.

Behind the scenes, the new auto insurance carrier checks your records, including credit, thoroughly, looking for any discrepancies.

If they find even one error, the results may end in disaster.

This is why you must have excellent records of your own for review. You need to know the latest details of your driving history, as well as any past issues with previous car insurance companies. Take your time and research all options before you opt out of your current contract. Additionally, think about what the new car insurance company will investigate first.

If you made late payments, received cancellation notices, or filed too many claims, they will find out. It is always a bad outcome when the call comes from a representative advising that your information does not match.

They may take your omission as a way to circumvent the system or, worse, deceive them. Sometimes, they do not bother to call at all; they may simply send you a letter in the mail. You have to reach out to them and provide some type of explanation.

Even if it is an honest mistake, they may decide to cancel the policy and flag your personal data in their computer as a way of future identification. If this happens, not only do you lack an active policy, but also you must start your search all over. Since you cancelled your old policy, you may not have an opportunity to return. If they do accept you back, chances are that it will be at an inflated rate.

Wise Decisions Go a Long Way

Wise decisions go a long way in determining the expenses involved with changing car insurance carriers. Of course, the immediate concern will be the amount of money you pay, but as you dig into the entire process, you will soon discover other ways your decision can affect you.

Although you may save up front, there are many circumstances that may arise that can ultimately have you paying more in the end. The bottom line is that you can make a smart choice by following the proper guidelines or spend hours suffering the negative implications.

As soon as you make up your mind to leave your car insurance company, get to work on learning the pros and cons involved. The steps involved are simple as long as you know what you have to lose and what you stand to gain.

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