Car insurance is something most people do not think about until they have to. They think about it when buying a car. They think about it when renewing each year. And they think about when it’s time to make a claim. Other than that, it is a utility that is not top-of-mind. But every two or three years, it might be good to think about car insurance apart from the instances mentioned above. Why? To help save some money.
Sticking to one insurance company for life is easy, but is it worthwhile? A time might come when there is a better deal out there. If you do not shop around for it, however, you lose out. Likewise, if you are dissatisfied with your current car insurance company, then you have good reason to switch. With proper preparation and sufficient research, switching car insurance companies is a breeze.
Can You Change Auto Insurance at Any Time?
While car insurance lasts for a year, you can cancel yours at any time. Car insurance companies have no rules preventing you from terminating your contract. However, there are things to consider before doing anything too drastic. For one, it is illegal in Canada to drive an uninsured car. As such, before canceling your car insurance, make sure you have another one already in place.
When looking for a new insurance, it helps to compare auto insurance rates and coverage between at least 3 companies. You get the best value this way as you see all the options. Some people even take these rates and show them to their old insurance company. Many companies just want to keep your business, so they match or beat the rates of competitors. The result is a better deal for you.
Is There a Penalty to Cancel Car Insurance?
Most insurance companies charge a penalty when you terminate your contract mid-term. Think of it like canceling your phone plan and having to pay a certain amount. Penalty rates vary from company to company. It could be in the range of 5-10% of your premium, but some charge even more. This is why it is best to cancel when it is time to renew. That way, there are no penalties. However, if even after the penalty, your new coverage still comes out cheaper, then it might just be worth it.
When you cancel your policy mid-term, you are also entitled to a refund of your premium. Some insurance companies prorate this fee. This is when they refund you the total premium for the coverage you did not use. For example, you canceled your insurance after 8 months, and you still have 4 months left. The refund you would receive is for those 4 months. On the other hand, some companies short-rate the fee. In this instance, insurance companies deduct the penalty fee from the remaining premium and refund to you the rest.
How Do You Cancel Your Car Insurance?
Canceling car insurance is pretty simple. It involves calling your insurance agent and informing them of your intentions. It is important to end your insurance properly and not just stop paying. If you just stop paying without telling the insurers what you are doing, they would come after you for your payments. Moreover, if you continue to drive with a lapsed insurance, you are technically breaking the law.
Before ending your old insurance, also make sure that the new one is already active. Not only is it illegal to drive without insurance, but it is also financially very risky to have a gap in your coverage. If an accident happens during that time, you would have to cover all the repair costs of your vehicle. And if someone else is involved? That is even worse. Their insurance company could come after you and charge you all their medical and repair costs if you are found liable. With no insurance of your own to help you, you could be in serious financial trouble. In addition, you are also committing an offense and could pay a penalty of up $5000 or more.
Can Car Insurance Policy Be Transferred?
If you are planning to end your current car insurance because you are selling your car, you might want to hold on first. When you sell your car, you can simply transfer the policy to the new owner. That way, you do not have to cancel your insurance mid-term and pay the penalty. That also saves the new owner the trouble of getting the car insured all over again. Of course, this is dependent upon the new owner agreeing to the transfer.
Switching insurance companies is fairly easy. Once you have found the best replacement, you just have to end your policy with your current insurance company. Bear in mind that not paying and letting your insurance lapse does not count as “ending” your insurance as the company would still make you pay what you owe. At the same time, ending your insurance coverage without a new one already in place is very risky. You could get into serious financial and legal trouble if you have no car insurance and then get involved in an accident.
Ending your insurance mid-term also entitles you to a refund of your remaining premium. Some companies prorate this amount, while others short-rate. A prorated amount means you get the total remainder of your premium for the unused coverage. A short-rated amount means you get the total remainder minus the penalties you owe.