Is switching car insurance worth it?

Car owners are not happy these days.

With premiums rising and customer satisfaction on the decline, nearly half of American drivers say they’re shopping around for new coverage, according to J.D. Power’s 2024 U.S. Insurance Shopping Study.

But in many cases, consumers are not finding better deals and end up staying with their current provider.

Stephen Crewdson, senior director of insurance business intelligence at J.D. Power, says customers are looking for better deals after seeing their premiums steadily increase over the past few years. The primary culprit? Inflation.

“Insurers were caught off guard with inflation,” he says. “They’re still catching up. Most insurance companies waited a while to increase their premiums — they waited to see what those effects would be.”

That’s not the only reason. The cost of parts and labor also rose, compounding the problem, Crewdson says. And with supply chain issues making it more difficult to obtain parts to repair cars, insurers also were paying for more days of rental car coverage.

“Economics led to higher claims costs,” Crewdson said.

Can you really switch and save?

With car insurance premiums up 14% year over year, according to the Bureau of Labor Statistics’ October 2024 data, drivers are searching for savings.

“We’re seeing more people struggling to pay their bills than we ever have,” said Avery Moore, president and CEO of ECI Insurance in Piedmont, Oklahoma.

Insurance company advertisements lead consumers to believe that they can get a better deal by switching carriers, enrolling in a usage-based insurance program or signing up for a multi-car discount.

Many insurance companies also encourage consumers to bundle their home and auto insurance because car insurance is where consumers potentially can save money – about 15% on average.

And sometimes, it works – even in a roundabout way.

Phoenix resident Krisann Valdez, 35, hadn’t planned on switching car insurance when she discovered her homeowners insurance with Geico had doubled. In response, she asked the insurer for a better rate, but the company refused.

“We had two water damage claims, so I understood it,” she said. “We asked them to shop around, and they said, ‘Sorry, that’s the best we can do’.”

Then, Valdez’s husband talked with a friend at State Farm. The couple ended up switching carriers and bundling their auto and homeowners insurance into a new policy. The move ended up saving the couple about $300 over six months on their auto insurance (as well as $1,200 on their home insurance).

Other strategies for saving on car insurance

Sometimes, people can’t find a better deal by switching insurers.

Palm Bay, Florida, resident Jeannine Mancini, 37, saw her car insurance shoot up from $140 per month to $350 when she added her 17-year-old daughter to the policy. She used a web-based quote comparison tool to shop around for a better rate, but couldn’t find one.

“The quotes were absolutely insane — $600 per month,” Mancini said. “You’d think I’d have a suspended license with these quotes. I have no tickets and a totally clean driving record. But when I added a new driver, the rates skyrocketed.”

Adding a teen driver to your auto insurance policy can significantly increase your premium because of the higher risk associated with inexperienced drivers. Insurance companies often charge more for teenage drivers because they are statistically more likely to be involved in accidents.

But you can still save money if you exploit every car insurance discount you qualify for. For example, opting to have your driving monitored by an in-vehicle device or app on your phone in exchange for lower rates can result in savings of 30% or more, depending on the insurer. Progressive’s Snapshot and State Farm’s Drive Safe and Save are two such examples.

Improving your skills as a motorist can pay off, too. Taking a defensive-driving course can result in a savings of 5% to 10%. And maintaining a clean driving record year after year will also mean lower premiums in the long run.

To save money, Mancini and her daughter both completed a safe driving program and installed a driving monitor application on their phones. Her monthly rate dropped to $264 after a year of using the monitoring app and her daughter turning 18.

New Orleans resident Susan Rigney, 53, had a vastly different experience adding her 17-year-old son to the policy she and her husband have. After shopping around, they determined that it wasn’t any cheaper and would be easier to add him to the policy they already had. The family’s monthly payment rose from about $360 to $381 for three drivers.

Rigney said her son couldn’t get a policy on his own because he is a minor, so she and her husband added him to their policy.

“It was the easiest route to go,” Rigney said.

When should you switch car insurance?

No matter what kind of policy you have, reviewing your insurance coverage annually is a good idea. If you decide to switch, be sure your new policy is in effect before canceling your old one. Below are several reasons you may consider talking to your insurer about adjusting your coverage or shopping for a new policies:

• You drive an older vehicle. If you bought your policy several years ago when your car was new, it may be time to review your plan. You might consider reducing coverages or increasing your deductible.
• You’ve moved. A big factor determining your premium is where you live and park your car. You’ll likely pay more in an urban area or a residence that doesn’t have secure parking
• Your teenager has started driving. It’s expensive to insure teenagers because they’re inexperienced drivers. You may be able to get a discount if you use an app to monitor your child’s driving habits.
• Your commute has changed. The number of miles you drive each year is used to calculate your premium. If you work remotely and don’t drive much, you may want to switch to a low-mileage pay-per-mile policy.
• You got married. You may get a discount for having multiple drivers on the same policy.
• You had a bad experience filing a claim. If you struggled to file a claim with your current provider it may be time to change insurance. Good car insurance providers provide great service at affordable prices.

How to switch car insurance companies

If you’ve decided it’s time to part ways with your current insurer, whatever the reason, here are some tips for how to switch car insurers and find a better rate:

• Compare quotes. You should compare rates from at least three providers, experts say. An online quote-comparison tool can help you do this, or you can work with an independent insurance agent.
• Purchase your new policy. Make sure you have a new policy in hand before your old one expires to avoid a lapse in coverage. If you’re uninsured for even one day, your auto insurance rates may increase. If you’re in an accident or caught driving without insurance, you could face expensive fines or jail time.
• Cancel your previous insurance. After your new coverage is in place, you can start the cancellation process for your old policy. Your old company will investigate and close any open claims you may have.
• Obtain proof of insurance. Print your insurance ID card or download your insurer’s app to access it. Make sure you have proof of insurance while you’re driving.
• Notify your lender. If you have a loan or are leasing your vehicle, you must let the lender know about your new insurance coverage.

Before you switch, make sure you’re actually saving

If you’re shopping around for car insurance, be sure you’re getting quotes for coverage that matches what you’ve got currently so you can make an apples-to-apples comparison. If an insurer’s quote is exceptionally low, it may be because it doesn’t offer the same types of insurance or coverage levels that match your existing policy.

Moore said it’s important for consumers to understand precisely what coverage they’re getting when their rates are reduced.

Insurance company lawyers “have spent millions and billions of dollars going through this with a fine-toothed comb making sure they only cover what [insurers] want,” Moore said. “You need to understand your coverage and what you’re [potentially] giving up.”

Bottom line

Surging auto insurance costs in the past year have led many drivers to shop around for better rates. But finding significant savings can be difficult. While bundling home and auto insurance can help in some cases, it’s important to understand the coverage you’re getting when rates are reduced.

Adding a teen driver can significantly increase your premium, but there are ways to mitigate the cost increase, such as safe driving programs or driving monitor apps.

It’s a good idea to review your coverage annually and shop around for better rates if necessary.