4 Steps to Switching Car Insurance

Could you save hundreds of dollars by switching your car insurance? It is a question worth asking yourself at least once a year. By doing a little research now, you may be able to find a comparable insurance plan at a better rate with another company and save money. But you have to make sure you take the appropriate steps to switch because you don't want to have a lapse in coverage.

The Insurance Information Institute in New York suggests asking yourself if you're happy with the cost, coverage and service of your current policy each time it comes up for renewal. If the answers are "yes," stick with your policy. But if you're not sure, shop around.

Here are four key steps to take when it comes to switching car insurance:

1. Review Your Current Driving Situation

Take note of your driving circumstances as well as the needs of other drivers in your household. Do you have a newer model car? Do you commute several miles each week to work? Do you have recent traffic tickets?

According to the National Association of Insurance Commissioners (NAIC), your potential new insurance company may ask you all of these questions as part of the underwriting process. You'll also likely be asked about the number of drivers on the policy, your driver license information, and the insurance coverage and limits you'd like to purchase.

Take a look at your existing auto insurance policy. Knowing what you currently have will make it easier to create apples-to-apples comparisons with the rates you receive from different insurers. An easy way to do this is to study your current policy's declarations page, which describes the insurance you have, including the amount of coverage as well as coverage limits, and the amount of your deductible. The more you know about your current coverage, the better shopper you'll be.

2. Shop Around

Once you're familiar with your current policy, it's time to look for alternatives. A good first call is to your current insurance agent or the insurance company itself (some insurers, such as Geico and Progressive, don't work with agents). If you're not happy with your existing policy (if you think the premiums are too expensive, for example), ask if there are ways to lower your rate for the same amount of coverage. You may be eligible to receive discounts you're not getting.

Here's a list of common insurance company discounts, according to the NAIC:

• Having safety devices in the car, such as anti-theft features
• Having a good driving record
• Driving a low number of miles a year
• Having multiple cars on the same policy
• Being a student who gets good grades
• Insuring both your home and car with the same provider

While you're reviewing discounts, be aware that switching to a new provider could affect discounts you already have with other types of insurance. For example, if you're already getting a homeowner's and car-policy rate reduction from your current provider and you move your car insurance to a different company, you may lose the discount you receive for homeowner's insurance. It may make more financial sense to stay where you are or switch both policies to a new provider that will give you a rate reduction for both.

In addition to speaking to your current agent or insurance company about your options, you can look online to research potential companies and obtain quotes. It is also a good idea to get referrals from family members, colleagues and other people whom you trust. If they have had to file a claim with the insurer, they could tell you in person about their customer service experience.

If you're buying through an independent agent who represents multiple insurance companies, you can explain that, while you like working with the agent, you'd like to check out other carriers. Ask for a suggestion. A good agent should be able to offer you customized choices to fit your needs.

3. Don't Skimp on Coverage

As you receive quotes, make sure the insurance coverage and deductibles mentioned are satisfactory. Just because a rate quote may be lower than what you're currently paying doesn't mean it's a better deal if the coverage is lacking. If you're not sure how much coverage you need, discuss your needs with insurance company representatives and ask for guidance.

For example, if you have significant assets, you may need more than just the state minimum for bodily injury liability insurance. The same is true for property damage coverage. The retail price for an average new vehicle could easily top $30,000, but in many states the minimum property damage coverage required is only $25,000. If you were responsible for a loss and did not have enough insurance coverage, you'd likely be on the hook for the difference.

Though it's important to have ample liability coverage, if you drive an older model vehicle that is paid for, you may choose to skip some optional types of coverage, such as collision and comprehensive insurance, to keep premiums low.

Collision insurance pays for the physical damage your vehicle receives if it collides with another object, such as a tree or another car. Comprehensive insurance pays for damage to your car from causes other than a collision. This could include vandalism, broken glass, fire and theft. If this coverage is more than your vehicle is worth, you could skip it to lower your rates. Just understand that you would then be paying for these losses out of your own pocket if such damage occurs. People who live in areas prone to such natural disasters as floods, high winds and earthquakes might want to think about retaining their comprehensive coverage, experts say.

Another way to get a lower premium is to ask for a higher deductible. If you are willing to pay $1,000 out of pocket for a claim instead of $250, you could lower your rates. But make sure you can afford the higher deductible in the event that you suffer an insurable loss.

4. Notify Your Old and New Providers

After conducting all your research (and with a bit of luck), you may well find a company that offers good coverage at a lower rate. You may be willing to switch, but before you sign a new agreement, call your state's department of insurance to learn if the company is permitted to do business in your state. You can also check out business rating service A.M. Best to check out the company's financial stability. It's worth the extra time to spend before you agree to pay hundreds of dollars on a new policy.

Once you've verified that the new provider can do business in your state and appears financially stable, it's time to make the switch. Let all parties know in writing, so that there is no gap in coverage.

If you end your existing auto insurance policy before it expires, you may receive a partial premium refund, depending on the terms of your agreement. However, you should continue paying for your old policy until the new coverage is confirmed in writing. Otherwise, the old policy could be dropped for nonpayment before the new policy starts. And in most states, driving without proper car insurance coverage is against the law.

Make it a priority to review your insurance policies on a regular basis. Household driving situations change often, and so do state laws that could affect the price of your premiums. By taking some time each year to do some car insurance research, you can make better decisions and pay the best possible price for the best level of car insurance coverage.