Tips on switching auto insurance companies

Whatever the reason for switching auto insurance policies, there are a few things to think of before switching from the old auto insurance company to a new one.

Tips on switching auto insurance companies

For starters, make sure, without a doubt that the new auto policy is bound and in force. Be sure to obtain written confirmation as proof that coverage is in effect. With today’s technology, it is quick and easy for an insurance agent to fax or email proof of coverage.

Once the proof of auto insurance coverage is in hand, the next step is to request the old auto insurance company to cancel coverage. When requesting the cancellation, make sure to provide the old auto insurance carrier with the new insurance company name and policy number. Insurance companies are required, by law, to notify the Department of Motor Vehicles if there is a lapse in coverage. By providing the new auto insurance carrier’s name and policy number, the old insurance company does not have to notify the DMV of a lapse or gap in coverage (such a gap in coverage can be costly to the policyholder).

Now that the new coverage is in effect and the old auto policy is canceled there are still a few bookkeeping and paper trails that must be taken care of. The amount of paperwork depends upon when the policy was replaced.

End Term Auto Policy Renewal

If the automobile insurance policy changed carriers at the end of the policy term, the paperwork is very much similar to a normal auto policy renewal. The policyholder must obtain new insurance ID cards, insurance policy and invoice for premium payment.

The only change would be to check the policy to ensure the coverage terms and conditions were bound as specified and that the lien holders (if any) are correct.

Mid Year Auto Policy Replacement

switching auto insurance companies

An auto insurance policy that was replaced mid-term comes along with a little more paperwork than an annual policy renewal. In addition to the usual renewal checklist, below are a few things to keep in mind when initiating a mid term auto policy replacement:

Insurance ID Cards: Because the old insurance company did not run its full policy term, the auto ID cards that are sitting in the glove compartment will show a current policy term. Make sure to discard the old insurance cards and replace them with the new ones. Don’t wait until an accident to realize the insurance ID cards are incorrect.
Cancellation Endorsement: Follow up for the cancellation endorsement from the old insurance company. Submitting a cancellation request is not the same as a policy actually being canceled. Make sure to receive the policy cancellation endorsement.
Auto Policy Return Premium: The last item to follow up for from the old insurance company is the unearned premium. Be aware, however, that some insurance companies will apply a short rate cancellation factor. Short rate cancellation incorporates a penalty for early policy cancellation. The penalty may be as much as 10%. Therefore, instead of receiving a pro rata return for the unearned auto premium, there may be a 10% surcharge deducted.

Understanding Auto Insurance Liability

Auto insurance liability isn’t something people talk about every day. However it is a very important auto insurance coverage for many reasons, the least of which is that it is mandatory in all 50 U.S. states in some form or another.

Understanding Auto Insurance: What Is Liability?

Auto insurance liability simply means the driver’s legal obligation to pay for damages when at fault in an auto accident or other situation where bodily injury and/or property damage is incurred.

The driver’s auto insurance pays up to the amount set by the driver as reflected in the auto insurance policy. Types of liability coverage include

Bodily injury: pays medical expenses for the other person’s injuries
Property damage liability: pays expenses for the other person’s car repair or other property loss

auto insurance companies

Depending on the auto insurance company, auto insurance liability coverage may be either combined into one single coverage or split between bodily injury and property damage.

Most states require drivers to carry minimum liability coverage which covers the driver’s legal responsibility to pay for others’ medical expenses and/or property damage when at fault in an auto accident.

Understanding Auto Insurance: Why is Liability So Important?

Auto insurance liability is important for many reasons. The most important reason is that it protects the driver financially if he or she is found legally responsible for causing injury to another person or their property.

Liability coverage cannot be eliminated, however it can be reduced to save the driver money on auto insurance. If the driver elects to reduce liability coverage, he or she should be aware of the risks.

Some auto insurance experts recommend that drivers maintain a liability limit of $1 million. While that figure seems outrageously high, consider the following scenario:

Driver’s auto insurance carries a $250,000 limit on bodily injury liability coverage.
Driver strikes a pedestrian in a crosswalk on a busy street.
Pedestrian sues for damages in court.
Court awards pedestrian $500,000 in damages.
Driver is now liable for $250,000 out of pocket.

Many drivers hear the call to maintain a higher liability limit, but want to believe something like the above scenario will never happen to them. Maybe they are right; but maybe they’re wrong. It is simply a matter of managing risk.

Understanding Auto Insurance: Liability and Rental Car Scenario

One of the most common decisions drivers face when renting a car is whether to accept the rental car company’s offer for liability coverage. Meaning, if the driver is found at fault in an auto accident with the rental car, who pays for damages.

In most cases, liability auto insurance is extended to rental cars for those who are already covered under their own auto insurance. Thus, accepting liability auto insurance coverage while in the rental car office is simply adding an unnecessary expense.

However, drivers renting cars should always check with their auto insurance company first before renting the car to make sure liability extends to rental cars under their auto insurance policy.

Understanding Auto Insurance: The Bottom Line on Liability

Many drivers see the term “liability” on their auto insurance and have no idea what it means or how important it is for financial protection in the case of bodily injury and/or property damage.

But taking the time to understand auto insurance liability, why it’s important, and scenarios where auto insurance liability may be helpful aids in underscoring the value of this auto insurance coverage.