To some, it may sound like as much fun as the dentist, but switching car insurance companies can make a great deal of sense. Besides, getting new car insurance really doesn’t have to be an ordeal.
That being said, to make sure you’re getting the best policy for your situation — and snagging that price cut that many people score when they make a successful switch — it’s important to follow a step-by-step plan. Read on to learn what to do if you’re wondering how to switch car insurance.
Related: How to save for a car
When Do You Need to Switch Car Insurance?
Wondering whether switching car insurance companies makes sense? Here are some common reasons to make the change:
- Your life circumstances have changed: Many people seek a new policy when their life has changed. If you have bought a new car, you need to look into options. If you’re planning to move to another state (or even to a different zip code), if you want to add a spouse or a child to the plan, or even if you have a new job, your existing insurance might no longer be the best fit.
- You want to lower costs: Getting the least expensive premium is often the goal of getting new car insurance. If you noticed a sharp increase in your premium and didn’t have an accident or any other triggering incident, then switching may be a good way to lower your car insurance premiums.
- You’re dissatisfied or looking to get certain perks: There are other reasons to change insurers aside from cost. Maybe you had a poor customer service experience with your current provider. Or perhaps you want a service that another insurer offers, like free roadside assistance.
- Your credit score changed drastically: Another reason you might want to consider getting new car insurance is a drastic decrease or increase in your credit score. That shift could have a good (or bad) effect on your present policy, but a different insurer could look at it differently, so it’s worth your time to investigate. (Note: California, Hawaii, Massachusetts, Michigan and New Jersey don’t let insurers set policy rates based on credit scores.)
On the other hand, there are some times when changing up your insurance might not be the best idea, including when:
- You’ve just had an accident or gotten a ticket: If you’ve had a recent accident or received a ticket, it might not be a good time for a change. Your insurer will likely raise your rate but the recalculation won’t take effect until your annual renewal time. You may as well take advantage of the months you have left before the policy renews.
- You’ll lose certain benefits if you switch: Some companies offer loyalty discounts or accident forgiveness clauses for customers who stick with them. Make sure the loss of those benefits is worth it to you.
How to Switch Car Insurance in 5 Steps
If you’re ready to change car insurance, here’s what to do.
1. Research and Evaluate Your Coverage Needs
Do you have too much insurance or too little? The former could strain your budget, but the latter could leave you exposed to financial disaster.
Nearly every state makes it a law that you pay for some liability coverage or you can’t drive the car. After figuring out that base, it’s time to determine your collision and comprehensive car insurance needs.
Taking into account your type of car, your driver’s record and your assets, you can determine how much coverage you really need. You need to know that before you approach insurers eager for your business.
2. Shop Around
There are many more car insurance companies out there than you may realize, making it a highly competitive business. Experts recommend that you get quotes from at least three insurers.
You’ll need to have facts ready to feed into the evaluation to get a quote, including:
- The address where the car will be stored
- The car’s make, model and year
- The Vehicle Identification Number (VIN)
- Your driver’s license or Social Security number
Be prepared to give the same facts to each insurer so it’s an accurate comparison. Also, check out the companies’ customer service records and review each company’s payment options. Don’t forget to find out what discounts that you could qualify for too.
3. Contact Your Current Insurer
Once you’ve picked your new plan and have proof of insurance, contact your previous insurance company to cancel. Some insurance companies will penalize you if you cancel before the policy expires, so be sure to keep this in mind.
To be on the safe side, log onto your account and cancel the automatic payments after you’ve ended the old policy. Some experts recommend that you put this all in writing and send a letter to your insurer, specifying to cancel the coverage by the agreed-upon date.
4. Avoid a Coverage Gap
It’s extremely important to make sure there are no gaps in your auto insurance, even a single day. You’ll bring a firestorm of legal and financial problems on yourself if you have an accident while uninsured, and you may even lose your driver’s license.
Also, should you seek out a new insurer in the future, if you have a record of lapsed insurance, you could be stuck with an expensive policy. So before canceling your old insurance, make sure to triple-check the effective date of your new policy.
5. Print Out Your ID Cards and Switch
After you’ve signed up with your new insurer and canceled your old plan, take the former ID card out of your car or your wallet and replace it with your new one. If you haven’t received the card in the mail yet, you can always print it out. If your state allows digital proof of ID, you can access your digital ID card through the insurer’s app.
How Often Can You Switch Car Insurance Providers?
You can switch companies as often as you like, and there is generally no penalty for doing so (though some insurers do charge a fee if you switch before the end of your coverage period). The Insurance Information Institute recommends reviewing your coverage once a year.
Aside from switching carriers entirely, you can also speak to your current insurer about updating your plan if your life circumstances have changed since you got your existing plan.
The Takeaway
A better auto insurance plan might exist for you — but how to change car insurance, you wonder? It’s not that hard. Making the change requires research into how much coverage you really need, obtaining quotes, and then, once you’ve decided to switch, canceling properly and making absolutely sure there are no coverage gaps.
Learn more:
This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.
More from MediaFeed:
How to refinance an auto loan
In times of lower interest rates, you may start to wonder about whether you should refinance your auto loan. And why not? According to 2020 data from RateGenius, money saved with a new auto loan is at an all-time high. Auto loan refinancing deals saved borrowers $989.72, on average, in 2020.
With that much cash up for grabs, it’s no wonder that auto refinancing loans are in big demand. Key strategies for auto owners who want a good refinance loan experience include being prepared and making sure to understand all the details. Read on for information that may help.
phototechno/ istockphoto
When you refinance an auto loan, you’re essentially securing a new auto loan. You use the new loan to pay down the balance of the original car loan. That all takes time, effort and money (for loan applications and servicing fees). That’s why you should be sure you have a good reason before you go to the trouble of taking out an auto refinancing loan.
So when should you refinance your auto loan? The fact is that vehicle owners refinance their auto loans for a variety of reasons that can all be worthwhile, depending on the situation. Most often, car owners refinance their loans to achieve the following personal financial goals, such as:
- To Lower Monthly Auto Loan Payments: Getting a new auto loan at a reduced interest rate can cut monthly payments down, leaving more cash in the till for other household expenses.
- To Get a Lower Interest Rate: Depending on the loan, a car owner may also be able to save money over the lifetime of the loan by getting a reduced interest rate. Take a vehicle for which the original loan was $25,000 and the refinance loan is $21,000. For a 60-month loan where the interest rate is cut from 7% to 5%, for example, the refinancing could save approximately $6,000 over the life of the loan.
- To Shorten the Loan Term: Car owners who are cash flush may shorten their loan terms to pay off the car faster, thus saving significant cash with lower interest rate payments.
- To Extend the Loan Term: Car owners who need some financial breathing room after a job loss, an injury or illness, or a divorce or other issue can extend the term of the loan to reduce monthly (but not overall) loan costs.
- To Get Some Extra Cash: If you have enough equity in your car, you might be able to take out a refinance loan that’s more than what you owe. That way you could get cash in hand, too. This is called a cash out car refinance. But realize that if you opt for this kind of refinancing, you will still have to pay back both the car loan and the extra money.
Also recommended: If you’re new to the world of auto finance, learning some auto loan terminology may help.
istockphoto/demaerre
Where does a borrower start with the auto loan refinancing process? Ideally, with a good grip on what a refinancing deal has to offer. Auto loan consumers are best off when they fully understand the entire refinancing. It can help to make sure you have answers to these questions:
- Do you meet the lender’s financial requirements? While each bank or lender has its own rules and regulations on auto refinancing, many banks have similar lending limits. For example, your auto usually must be less than 10 years old and have less than 125,000 miles on it. While the exact figures may vary from lender to lender, know possible vehicle restrictions heading into any refinancing deal.
- Are there any prepayment penalties? It’s usually a good idea to pay off an auto loan as soon as possible. Doing so clears the debt and puts more money in your pocket. However, some financial institutions may stick you with a prepayment penalty if you pay off the loan early. Be sure to examine your existing loan contract for any prepayment penalties and factor them into your costs.
- Do you know the total cost? Before green-lighting an auto loan refinancing deal, you need to know the full cost of refinancing the car. Make sure you know how much you’ll save per month and, even more importantly, over the life of the loan. When you refinance, you may be saving money on a monthly basis but adding more dollars to the overall cost of the vehicle. You’ll want to be sure you’re factoring any fees or penalties, too. A good auto loan refi calculator can be highly useful here.
- What’s your credit score? Most lenders will expect a minimum credit score from potential borrowers. Typically, a FICO credit score of 700 or more will get you the lowest loan rates on an auto refinancing loan. That said, a FICO score of 660 should ensure that you qualify for a standard auto loan refinancing deal.
DepositPhotos.com
With that prep work complete, now it’s time to figure out the best path to a good auto refinance loan. Get the job done right with these action steps.
DepositPhotos.com
Start the auto loan refinancing process with some data-gathering. To file a loan application, you’ll typically need these documents:
- Your original auto loan: Lending institutions will require the original loan paperwork to process a new loan. The original loan paperwork should include the loan amount, the monthly payment, the interest rate, the payoff number and the up-to-date loan balance
- Your vehicle information: Auto loan providers will also ask for your current vehicle information (think a Carfax for your own vehicle.) This document should include the vehicle’s make, model, year, mileage and vehicle identification number.
- Your auto insurance paperwork: Make sure you have your car insurance records, including type of insurance and the amount of the insurance included in the policy. Auto lenders won’t make a loan to an uninsured or significantly underinsured vehicle owner. That’s because the lender has a stake in the vehicle as well. If the car is damaged or totaled, your lender will want to know it was properly insured.
- Your employment records: Your auto loan refinancing lender may also ask for proof of income and employment, to ensure you have the means to repay the loan.
ipuwadol
Kick off your auto loan refinancing deal by listing what you want from the loan, such as a lower interest rate, no or low fees, a streamlined application process, and solid customer service. Having a candid conversation with your current financial institution is also a good step to take since it may give you an idea of what kinds of loans you could qualify for. And as you look for refinancing loans, remember that you may also want to explore online auto loan refinancing options since they tend to have fewer fees and competitive rates.
gpointstudio / istockphoto
When you’ve found the loan you want, follow the instructions to apply. A typical auto refinancing loan application likely includes the following:
- Name
- Date of birth
- Email address and phone number
- Address
- Social Security number
- Driver’s license number
- Work status
- Your bank’s name, address, routing number and checking account number (so the lender can deposit your loan amount, assuming it is not your bank)
- Your vehicle information
- Your auto insurance information
Once you complete the application, review it thoroughly to confirm that the information is accurate and up to date. Any discrepancies or missing information may lead to a loan rejection. And know that the lender will likely perform a credit check.
DepositPhotos.com
Once your application is approved, your new auto loan provider will pay off your old auto loan or give you the funds to do so, and become your auto loan manager. Future payments will go to the lender who handles your refinanced loan. It is, however, a good idea to confirm with your original lender that the auto loan was paid off and you don’t owe any more payments. After that, be sure you pay the new loan on time and start enjoying the savings from your refinanced auto loan.
DepositPhotos.com
Whether you simply want to get an auto loan with more favorable terms or you’re looking to adjust your car loan repayment period, refinancing your auto loan allows you to take advantage of lower rates, put more cash in your pocket, and get a loan that meets your unique personal financial needs. Handled correctly, refinanced auto loans can be a big win-win for vehicle owners, who can gain an auto loan with better terms and potentially save money in the process.
Learn more:
This article originally appeared on LanternCredit.comand was syndicated by MediaFeed.org.
Lantern by SoFi:
This Lantern website is owned by SoFi Lending Corp., a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license number 6054612; NMLS number 1121636. (www.nmlsconsumeraccess.org)
All rates, fees, and terms are presented without guarantee and are subject to change pursuant to each provider’s discretion. There is no guarantee you will be approved or qualify for the advertised rates, fees, or terms presented. The actual terms you may receive depends on the things like benefits requested, your credit score, usage, history and other factors.
*Check your rate: To check the rates and terms you qualify for, Lantern conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender(s) you choose will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
All loan terms, including interest rate, and Annual Percentage Rate (APR), and monthly payments shown on this website are from lenders and are estimates based upon the limited information you provided and are for information purposes only. Estimated APR includes all applicable fees as required under the Truth in Lending Act. The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors. The loan terms and rates presented are provided by the lenders and not by SoFi Lending Corp. or Lantern. Please review each lender’s Terms and Conditions for additional details.
Personal Loan:
SoFi Lending Corp. (“SoFi”) operates this Personal Loan product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lenders/partners receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website.
More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student Loan Refinance:
SoFi Lending Corp. (“SoFi”) operates this Student Loan Refinance product in cooperation with Even Financial Corp. (“Even”). If you submit a loan inquiry, SoFi will deliver your information to Even, and Even will deliver to its network of lenders/partners to review to determine if you are eligible for pre-qualified or pre-approved offers. The lender’s receiving your information will also obtain your credit information from a credit reporting agency. If you meet one or more lender’s and/or partner’s conditions for eligibility, pre-qualified and pre-approved offers from one or more lenders/partners will be presented to you here on the Lantern website.
More information about Even, the process, and its lenders/partners is described on the loan inquiry form you will reach by visiting our Personal Loans page as well as our Student Loan Refinance page. Click to learn more about Even’s Licenses and Disclosures, Terms of Service, and Privacy Policy.
Student loan refinance loans offered through Lantern are private loans and do not have the debt forgiveness or repayment options that the federal loan program offers, or that may become available, including Income Based Repayment or Income Contingent Repayment or Pay as you Earn (PAYE).
Notice: Recent legislative changes have suspended all federal student loan payments and waived interest charges on federally held loans until 09/30/21. Please carefully consider these changes before refinancing federally held loans, as in doing so you will no longer qualify for these changes or other future benefits applicable to federally held loans.
Auto Loan Refinance:
Automobile refinancing loan information presented on this Lantern website is from MotoRefi. Auto loan refinance information presented on this Lantern site is indicative and subject to you fulfilling the lender’s requirements, including: you must meet the lender’s credit standards, the loan amount must be at least $10,000, and the vehicle is no more than 10 years old with odometer reading of no more than 125,000 miles. Loan rates and terms as presented on this Lantern site are subject to change when you reach the lender and may depend on your creditworthiness. Additional terms and conditions may apply and all terms may vary by your state of residence.
Secured Lending Disclosure:
Terms, conditions, state restrictions, and minimum loan amounts apply. Before you apply for a secured loan, we encourage you to carefully consider whether this loan type is the right choice for you. If you can’t make your payments on a secured personal loan, you could end up losing the assets you provided for collateral. Not all applicants will qualify for larger loan amounts or most favorable loan terms. Loan approval and actual loan terms depend on the ability to meet underwriting requirements (including, but not limited to, a responsible credit history, sufficient income after monthly expenses, and availability of collateral) that will vary by lender.
Life Insurance:
Information about insurance is provided on Lantern by SoFi Life Insurance Agency, LLC.
DepositPhotos.com
Featured Image Credit: Mlenny.
