On this page
- Why drivers switch car insurance providers
- What to do before switching car insurance
- Step-by-step guide to switching car insurance providers
- What are standard costs and fees to note when switching car insurance providers?
- Conclusion for how to switch car insurance
Sometime in 2024, ratehub.ca surveyed about 1250 Canadians. The insights they got from the survey showed that 57% of policyholders had changed their insurance providers, and a larger percentage of former auto policyholders even doubted their ability to own a vehicle again.
This massive churn rate was primarily due to increasing premiums, vehicle repair costs, and even theft.
In situations like this, whether you’re midway through an auto insurance term or you’re about to complete it, the best decision might be to switch your car insurance provider.
Let’s discuss how to switch auto insurers in Canada. We’ll also discuss additional reasons why policyholders switch auto insurance providers and how to avoid costly mistakes throughout the process.
Why drivers switch car insurance providers
Suppose you’re fortunate to speak to a substantial number of auto policyholders who have switched their car insurance provider.
You’ll find that the majority of them didn’t switch for the fun of it… if there’s any fun at all. Most policyholders have solid reasons for switching. Let’s highlight some of these reasons.
Inflated premiums
By a large margin, premium increases are the biggest reasons why most policyholders prefer to change car insurance companies.
At the other end of the rope, insurance providers claim the main reason for this price hike is that policyholders are using more sophisticated, high-maintenance vehicles. Industry insiders also suggest that increasing car theft rate affects premiums.
Poor customer service
Customer satisfaction is a significant concern in any industry, and it’s even more crucial in insurance.
Many policyholders would prefer to switch car insurance providers if they feel their needs aren’t being adequately met. Other policyholders would switch if they sense that their insurer isn’t being completely honest in their dealings.
Better car coverage offers
Sometimes people switch auto insurance providers because they want better or more relevant protection.
Suppose you bought a newer car, or your lifestyle changed and you’re now working from home or driving less, a different insurer might offer coverage options you didn’t need before, more favourable deductibles, or better add-ons like accident forgiveness or usage-based premiums.
Major life changes
When most policyholders go through major milestones in their lives, it often warrants a change in their insurance needs and, by extension, a different car insurance provider.
These milestones frequently include new car purchases, residential relocation, marriage, and child-rearing.
What to do before switching car insurance
Switching your car insurance provider isn’t as simple as it sounds, at least it’s not as simple as your Netflix subscription. There’s usually a moderately long checklist of things to do before you change car insurance companies.
Compare insurance quotes and coverage levels
A good way to start is to window-shop. While doing this, try getting quotes from three or more insurance providers. You can do this yourself or via a broker.
Be sure you’re comparing like-for-like, e.g., same coverage, same limits, same deductibles, etc. In the survey by ratehub.ca, it was also discovered that many previous or potential policyholders often compare price alone, instead of comparing what they’re actually being covered for.
It’s even better if you check if the new insurer offers discounts that you may need, e.g., good driver programs, usage-based options, or bundling policies, etc.
Check cancellation fees and renewal dates
Most insurance policies often include a penalty that takes effect when the policyholder chooses switching insurance mid-term. Before changing your car insurance provider, you should check whether your current insurance policy includes such penalties.
If it does, a good way to handle it is to align the switch date with the end of your term, when the penalty is null.
Review deductibles and discounts
A lower premium will always feel great, but if it comes with a much higher deductible, your out-of-pocket costs in a claim could jump.
Also, switching could mean losing current discounts, such as loyalty benefits or accident forgiveness. On the other hand, a new insurer may offer better deals or a more favourable structure, so evaluate both sides.
Confirm the new provider’s reputation
Suppose your previous insurer’s services weren’t meeting your needs, unthinkingly taking in a new insurer could mean a movement from frying pan to fire for you.
Always verify a potential provider’s reputation before doing any business; you can even use a broker or browse through previous consumer complaints on their website. This way, you have a good idea of how the new insurer treats his clients.
Step-by-step guide to switching car insurance providers
So far, we’ve discussed some reasons why policyholders change car insurance companies as well as certain precautions to take before starting the whole process. Now, let’s dissect the entire switch process step by step.
Shop for quotes and pick a new provider
The first step to take is to request quotes from multiple insurers. Pro tip: online comparison tools and brokers are invaluable for this purpose.
Ensure that coverage is equivalent, i.e., liability, comprehensive, collision, deductibles, and optional coverages. Also ask your potential new insurance provider about discounts, loyalty programs, or any ways to lower your cost.
Apply and get approved for the new policy
After you’ve picked a new car insurance provider, fill in your application accurately. Any hint of dishonesty in your address, driving history, or any other crucial information can result in serious complications later.
Review the “declarations page” or “policy summary” carefully and check coverage details, premium, effective date, or any special conditions. Ensure you confirm when the new policy will begin, as it’s vital in avoiding a coverage gap.
Make sure there’s no coverage gap
Do not cancel your old policy until you are certain your new one is active. Ideally, you should time your cancellation so the new coverage starts very close to the end of the old one.
Some people even overlap for a day or two. Driving without insurance in Canada is risky legally and financially, so avoid any lapse.
Cancel your old insurance policy
Once your new car insurance policy is active, write and submit a notice to your existing insurer or broker. This notice should explicitly state the cancellation date.
Double-check your contract for cancellation procedures and fees, and request written confirmation that the policy has been canceled. This protects you if a dispute arises later.
Request a refund for unused premiums
If you paid for your previous policy in advance, you’re likely owed a partial refund. How much depends on policy terms, i.e., prorated versus short-rated.
Prorated refunds mean you get back the unused portion, and short-rate refunds mean the insurer deducts a penalty. Confirm with your old insurer exactly how much you’ll get back and when it will be issued.
Update documents and notify your lienholder if you have one
If your vehicle is financed or leased, your lender will need proof of insurance. Send them your new policy details and cancel any automatic payments for the old policy, so you’re not double-paying.
Keep your cancellation confirmation, refund information, and the new policy documents; don’t rely just on verbal commitments.
What are standard costs and fees to note when switching car insurance providers?
To prevent any rip-offs, you should always be aware of typical fees that come up when you switch auto insurance. One of the most common fees is the midterm cancellation fee.
It’s basically a penalty your insurer imposes when you terminate your current insurance contract before the contract ends. In cases like this, you may not get a full refund.
However, insurance providers would often return a portion of your premium. You should always ask for an estimate of the amount that you’ll receive. Having that information will help you decide if changing your insurer is worthwhile.
Sometimes, depending on the insurer or how the policy is structured, there might be administrative or setup fees when you switch car insurance providers.
Conclusion for how to switch car insurance
Learning how to switch car insurance providers is more than just a way to save money; it’s your chance to reassess whether your coverage still fits your life.
With more than half of active drivers making the move in response to inflated premiums, you’re not alone. By doing your research, timing the switch strategically, and keeping the proper documents, you can transition smoothly without leaving yourself exposed to penalties and risks.
With the right approach, changing car insurance companies can be smart, safe, and financially savvy.
FAQs about how to switch car insurance providers
Yes, you can. However, switching insurance mid-term can attract costly penalties.
Yes, but it mainly depends on the time of cancellation and the validity of the policy. An auto insurance policy cancelled mid-term warrants a refund. The refund amount will depend on the policy details.
There’s no need to alert provincial authorities when switching insurance companies.