Three Cautionary Notes Before Changing Auto Insurance Companies

We've all been inundated with advertisements, emails, commercials

and billboards touting the savings available by switching auto insurance companies. This is a highly competitive industry. Simply because another company offers a lower rate does not mean you should immediately call and cancel your insurance. There are a few things you should check before proceeding.

Here are a few things to keep in mind before switching your auto insurance company.

If you've been with one company for a long period of time and they offer a credit for the first accident, you may want to stay or see if the other company can match it. This is sometimes referred to as a "accident forgiveness" discount, "good driver discount," "longevity discount," or "longevity discount." The company will waive the first accident you have as a token of appreciation for your loyalty.

This discount can be quite substantial. Given that the majority of accidents increase your rate by 40% for three years, the potential savings over that three-year period could be several hundred dollars. However, when you change companies, you forfeit the credit you've accrued. If you are involved in an accident with that new company, how much will you regret not having that accident forgiveness when your rates are increased by 40%?

Additionally, ensure that the company you are switching to is not offering you a teaser rate for the first six months in order to secure your business and then bumping you up six months later once they have you on their books. Due to the lucrative nature of the auto insurance industry, companies may offer you a low-ball rate to entice you to switch, and then increase your rates at renewal. If the rate quoted by the new company appears to be too good to be true, conduct additional research. Consult insurance discussion boards or conduct a Google search for "XYZ insurance + Reviews."

Keep an eye out for hidden fees. This is one that has the potential to surprise you. Certain companies charge a monthly fee – typically $3–$5 per month. This equates to between $36 and $60 per year. That single fee can significantly reduce your potential savings, so be sure to factor it into the rates you compare. Ascertain that you are truly saving money when you make the switch.

Additionally, when shopping for auto insurance, keep in mind the new company's website and hours of operation. Ascertain that their hours coincide with yours. If they are only open from 8 a.m. to 5 p.m. and you work from 8 a.m. to 5 p.m., when will you be able to call them with a question or to file a claim? If you conduct all of your business online, you'll want to ensure that the company you're considering has a functional website that is available 24 hours a day.

You can save money on auto insurance by shopping around. Simply bear in mind the points I've made to ensure that the deal you're considering is truly a great deal.