Here’s why you might be overpaying for insurance, and how you can stop
Think about the last big purchase you made. How much did you research and shop around to get the best deal? According to Pew Research, eight in 10 Americans say it’s important to be able to compare prices from different sellers before buying something for the first time.
Now, think about the last time you shopped around for a new insurance policy. If you’re like most Americans, the answer is probably never. In fact, four in 10 Americans say they have never comparison shopped for auto insurance!
In a country full of comparison shoppers, why are so many of us forgoing the shopping experience for such an important product? We know that insurance shopping isn’t the most fun experience, but we were surprised to learn that many people simply don’t realize that they have the ability to cancel their insurance whenever they want.
While it’s tempting to think of insurance as something you can set and forget, that mindset could be costing you serious money. Here’s what you need to know about shopping and cancelling your existing insurance policy.
How often you should shop
Generally, we recommend shopping for insurance at least once a year to maximize your potential for savings. You should also shop right after you experience a big life change, as these types of events can make you eligible for reduced rates or discounts. The life events that could positively impact your insurance rates include:
- Getting older (particularly for auto insurance, rates typically reduce after the age of 25)
- Buying a home
- Having a child
- Getting a new job
- Earning a degree
- Increasing your credit score
- Moving to a less populated area
While insurance carriers check your credit during the quote process, it's only a soft check, so it won't affect your credit score. There is virtually no downside to shopping around; in fact, it can only help you.
Cancelling your existing insurance policy
Contrary to popular belief, you can cancel your insurance policies with most carriers at any time, even if you have a claim open. Some companies charge cancellation fees, so you'll want to check with your individual carrier before cancelling. If you prepaid for six or 12 months, you'll typically get a pro-rata refund.
If you’ve found a great deal and are considering cancelling, be sure to consider the following before signing on the dotted line:
- What are all of the potential fees you may incur if you cancel your existing policy during the period?
- Have you asked your existing carrier to match the price?
- Have you asked the new carrier for all applicable discounts?
- Can you bundle and save with your new carrier?
- Does your new policy provide sufficient coverage for your current situation?
- Have you spoken to friends/family or read online reviews about the company?
- Have you spoken to anyone at the company to get a feel for their customer service?