How to change car insurance – making the switch

It makes sense to have the car insurance in place that’s best suited to you – and your budget. And, if you’re unhappy with your cover or your car insurance provider, it’s worth looking to see if you could drive a better deal elsewhere.

Your car is more than a set of wheels that gets you from place to place – it’s also likely to be one of your biggest purchases, and that makes it worth protecting with insurance. But you don’t have to stick with the same insurance company year after year. We explain how to change car insurance – and the traps to avoid.

Why would you change car insurance?

Simply renewing your car cover when the annual premium falls due each year can seem like the easy option. However, insurance companies are keen for your business, and many offer tempting upfront discounts to entice new customers. As a guide, you may be able to save around 10% off your premium when you buy and pay for a new policy online. This makes it worth looking at different car insurance policies to see if you could enjoy better value for money or improved service while still getting the cover you need.

You don’t need to wait for renewal time to rethink your car insurance. It could be that your circumstances have changed – maybe you’ve replaced your old car with a new one, or you’ve changed address. Or perhaps you are using your car in a different way, such as driving less. You may also simply be looking at your budget for ways to cut back on expenses.These can all be cues to review what’s on offer through a variety of providers to see how your current cover stacks up.

4 steps to change car insurance

If you’ve decided you want to switch your car insurance, make sure to take care to avoid accidentally leaving yourself without cover. This four-step process can help you make the move seamlessly.

1.    Compare policies

The first step is to compare car insurance online and get a few quotes from different insurance providers to find a new policy that’s right for you. You can compare comprehensive car insurance with Canstar.

2.    Know what you’re buying

Whether you’re trying to reduce the cost of your car insurance premiums or find better quality cover, make sure you carefully compare the cover of any new policy with the cover your existing policy provides. Check the sum insured, all inclusions and any exclusions – these will all be set out in the Product Disclosure Statement (PDS). Also consider the Target Market Determination (TMD) before making a purchase decision. It’s also worth thinking about the excess – a higher excess can lower your premiums but you’ll have to pay more in the event of a claim. Contact a provider directly for a copy of the PDS and TMD, and you can give them a call if you have any questions.

If you have found a better deal elsewhere, it may be worth contacting your existing provider to ask if they will match it to keep you as a customer. This would save you needing to switch while still getting a better deal. But if they won’t budge, be prepared to walk.

3.    Take out the new policy before cancelling your old one

Next, decide when you want to make the switch. You can time it to take advantage of any discounts from your new company and to minimise any fees from your old one. The key is to make sure you have been accepted and paid for your new car insurance policy – and have the letter or email of confirmation from the provider – before you cancel your old policy. Overlook this step and you run the risk of being uninsured, which could prove costly.

4.    Cancel your old policy

With new cover in place, it’s time to inform your previous provider that you are cancelling your original policy. They should follow this up with written confirmation that the policy is cancelled. If you simply stop paying the premiums, it could negatively impact your credit rating.

While a new policy will take effect on a start date designated by the provider, ideally aim for the policies being simultaneously cancelled and started, respectively, on the same day.

Will I lose my no claim bonus?

The prospect of losing a no claim bonus, also known as a safe driver reward, can make you think twice about changing car insurance. A no claim bonus gives you a discount on your car insurance. Further savings can be available each year that you don’t make a claim, up to a maximum number of years.

However, some car insurance providers will let you include your existing no claim bonus as part of a new policy. Bear in mind that, though, you may not be able to transfer the discount if you are taking out a policy for another car. That said, Moneysmart advises against staying with the same provider just because of a no claim bonus – you could save more by changing.

Will I pay cancellation fees?

When you take out a car insurance policy, a 21-day cooling off period applies. This means you should be able to cancel the policy within the first 21 days and get a full refund, as long as you haven’t made any claims during that time.

After the first 21 days, a cancellation fee may apply if you want to switch mid-policy. Not all insurance providers charge a cancellation fee. Some do, and it can cost around $40 but this is something to check with your insurance company.

If you cancel your cover early, and you qualify for a refund, you should get back the unexpired portion of the premium, less any government charges that may apply.

If you cancel your cover by declining the annual renewal offer, you won’t have to pay a cancellation fee.

Main image source: Andrew Shapor/Shutterstock.com