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Can I change my car insurance in the middle of the policy?

Auto Insurance Policy

Here's what you need to know...

  • Auto insurance policies last for either a 6-month or a 12-month term
  • After the company underwrites the policy and the 60-day binding period has passed, the provider is bound to providing coverage at the price quoted for the remainder of the term
  • Insurance companies must prove a client violated the terms of their contract to terminate coverage in the middle of a term
  • Clients are free to terminate their coverage and switch carriers at any time during the policy period
  • If the policyholder wants to stay with their carrier, they can also make endorsements to their policy to add or remove coverage as desired

You’re required by law to carry auto insurance, but since the insurance marketplace is a competitive one, you’re not required to buy your coverage from a specific carrier. As long as the coverage is purchased from a company with an active license to do business in the state, the driver is complying with the law. This makes it possible to shop around and find the most affordable rates without being at risk of being fined.

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If you’re not happy with your premiums, it’s time to consider switching carriers. Don’t be put off by the fact that you have several months left in your term. The term dictates how long your premiums will stay level but it doesn’t dictate how long you must stay with a provider.

Think about the advantages and disadvantages of changing carriers before you take the leap and cancel your existing coverage.

Why do auto insurance policies have terms?

When you buy a car insurance policy, you’ll be offered a term that lasts for either 6 months at a time or 12 months at a time. In the insurance industry, this length of time is referred to as the policy term.

The term is when the coverage is afforded and defines exactly when the coverage ends and how much is due.

One of the major purposes of setting a term is to guarantee the rates that a policyholder pays for coverage. During the policy period, the rates will remain fixed unless the policyholder opts to make changes.

The insurance company can’t decide to raise premiums because of an accident or a violation until the term comes up for renewal and risk is reassessed.

Be Aware of the 60-day Binding Period

There’s always exceptions to every rule. In the auto insurance industry, companies are afforded some protection when they first take on a policy. Right after the application is received, the company is free to underwrite the risk and change premiums if they discover something new.

It’s also the company’s right to terminate coverage or backdate a rescission because the applicant was less than honest with the information that was provided. As long as the information is discovered within 60 days of the effective date, the company can order a cancellation for any reason.

This is the only time that an insurer has the option to change their mind when it comes to providing coverage. As you shop for coverage, be reminded of this binding period.

Can a policyholder change their mind?

relatives being added to your auto insurance policy

Insurers may be limited as to when they can change their minds, but policyholders are free to change their minds at any time. In this sense, the consumer has the advantage because they know they have level rates but are also free to shop around. If they find a premium that beats the one they’re currently paying, they are free to make the switch mid-term. While this is an option, it’s not always recommended.

Find Out About Cancellation Fees

Some insurance companies are free to charge their policyholders a cancellation fee for terminating their coverage before the end of a term. The state will prohibit exorbitant fees but tend to allow them so that the insurer is able to recoup for administrative costs.

Charging a fee also helps the insurance company collect a portion of the unearned premiums that they already factored into the financial projections.

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How much will the cancellation fee cost you?

Fees vary from company to company. How long you have left in the term can also have an effect on how much of your refund the company will take. If you’re canceling coverage because you’re no longer a vehicle owner or a licensed driver, the company may waive the fee.

If you inform the insurer you’re switching carriers, they will jump at the opportunity to collect extra money from you.

If the company offers a pro-rated refund, you’ll get all of your unearned premiums back. Companies with short-rate policies will hold onto some of those unearned premiums. Here two different types of fees companies may charge:

  • Fixed Cancellation Fee – Some companies will charge a fixed penalty. This can range from $30 to $50 and may be based on the balance that you have left for the term.
  • Short-rated Percentage – If you’re not charged a fixed rate, the company may calculate the fee by taking a percentage of the unearned premiums. The fee is somewhere around 10%. If you have a balance of $510 left on the policy, your fee will be $51.

Can I just change my existing coverage without switching?

Insurance Policy

If you’re switching carriers to make changes to coverage, you may be able to keep your current coverage without taking the leap. You’re free to make certain changes to your policy in the middle of the term when your needs change. Here are some changes that you can make to a policy you’re already paying for:

  • You want to change your deductibles
  • You’d like to remove the lender and drop physical damage coverage after paying off a loan
  • You’d like to raise your liability limits
  • You’d like to remove a driver who no longer lives in your home
  • You’d like to add optional forms of coverage like UM or Medical Payments
  • You’d like to update your mileage or your usage after changing jobs
  • You’d like to add a new driver living in your home
  • You’d like to add a new car you purchased

Always Price Shop After Making Changes

If you decide to update your current policy without canceling your coverage, it’s still wise to shop around. You never know which company might give you a better rate based on the new rating factors in your policy.

The only way to really find a company that’s competitive in your segment of the market is to actively review rate quotes.

The most effective way to review rate quotes is to use an online comparison shopping tool. You can either request quotes through each carrier directly or request multiple quotes at once through a single platform. Using a single platform is the best method for people who value their time and who like to research.

Get accurate price comparisons today and save time on a mission to save money. Enter your zip code in our FREE tool below to start comparing rates now!

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