Are There Penalties For Changing Car Insurance Companies?

Are There Penalties For Changing Car Insurance Companies?

Are There Penalties For Changing Car Insurance Companies?

Since the whole idea behind your decision to compare auto insurance quotes is so you can save money on your car insurance, the last thing you want to have to pay is a penalty to leave your old car insurance company.

If you have done your auto insurance comparison and decided that your current car insurance rates are not as cheap as you can get, you will also need to read the fine print on your policy.

Some car insurance companies charge you for cancelling, but this information is disclosed on your current policy and this is only applicable once you have paid your premium for the current policy period.

This is called a short-rate cancellation fee and every insurance company calculates it differently.

If you find while comparing auto insurance quotes another company that will offer you a cheaper car insurance premium and your current car insurance company charges a penalty for early termination, wait until your premium is due before changing companies. This way you will avoid paying a cancellation fee.

When there is a cancellation fee from your current car insurance company, they will take it out of the refund of your unused premium. You pay for your insurance in advance, which gives the insurance company control over your funds.

Your current car insurance company may not be one of the companies that charges a cancellation fee, but may make you wait for your refund check. Your check will come from the home office of the insurance company and the cancellation of your policy will need to go through the proper procedures. These things all take time, so you will be out that money for some time.

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Once you have decided to leave your current insurance company, any premium that you have paid in advance will be pro-rated to the day that the cancellation was put into effect. The insurance company will use that figure to decide how much of your premium to keep and how much you are entitled to be refunded.

It is not as cut and dried as if you pay for six months and cancel at three months, you are entitled to a refund of three months. The insurance company that you are currently with will apply their version of the short-rate cancellation fee and based upon the formula that they use to determine your daily usage of your insurance, they will deduct that amount from what you have paid.

As all insurance companies are regulated by the state, fees that they charge to cancel policies or how they calculate the short-rate fees have all been approved by the legislation.

For instance, the state of Maine allows a car insurance company to keep 10 percent of the unearned premium as a way to offset costs that the company incurred on your behalf by issuing your policy.

Just as each insurance company charges different fees, you need to know what your state has said about how much of your premium that the insurance company can keep if you should decide to cancel before your premium is due. The fee may make it worth your while to stay with your current car insurance company until your premium is due.

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Even though you find out that your car insurance company charges a fee to change in the middle of your premium, this should not stop you from doing an auto insurance comparison for a cheaper insurance premium.

It is easy to compare auto insurance quotes and if you find a cheaper car insurance premium, you should weigh all the fees and expenses that it will cost you to change companies in the middle of the policy period. If the expense is more than the savings, then simply wait until your policy period is up and do another auto insurance comparison.

Do not forget to include your current car insurance company when you are comparing rates.