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Colorado Insurance Blog

5 Common Mistakes When Switching Insurance [And How to Avoid Them]

There will eventually come a day when you need to switch insurance companies. Maybe you had a poor claim experience, or you want a coverage that isn’t offered by your current carrier. Whatever the reason, it’s in your best interest to avoid some costly mistakes.

These are some of the most common mistakes, and how to avoid them.

Mistake # 1: Failing to compare coverages.

Many agents will tell you that they are offering “apples-to-apples” coverage. The truth is, that doesn’t exist in insurance.

Every insurance company offers different coverages. Even coverages with the same name can vary from one carrier to another. One company can’t truly match coverage offered by another company.

It’s important to closely review the coverages offered before changing insurance companies.  If you don’t, you could be paying a lot more money out of pocket when a claim occurs.

Having an independent agent makes comparing coverages easy. Independent agents work with many insurance companies, so they can do work for you. They’ll run the quotes, compare the coverages, and let you know your best option.

If you don’t have an independent agent, here are some things to consider when comparing quotes:

  • Deductibles- All Perils and Wind/Hail
  • Liability and Medical Payments limits
  • Loss Settlement option- Actual Cash Value vs Replacement Cost
  • Optional Coverages:
    • Sewer and Water Backup
    • Ordinance or Law
    • Personal Property Replacement Cost
    • Service/Utility Line Coverage
    • Loss Assessment (for condo policies)
    • Extended Dwelling Coverage
  • Liability and Uninsured Motorist Limits
  • Comprehensive and Collision Deductibles
  • Glass Coverage
  • Rental Car/Loss of Use Coverage
  • Roadside Assistance

Mistake #2: Switching to save only a few dollars a month.

Switching insurance companies to save only a minimal amount can cost you more money in the long run.

Most insurance companies will offer you a “teaser rate.” By offering an advance quote discount, they get you to buy the policy. They don’t tell you that the discount will fall off in a year or two. When the true rate shows up at your next renewal, you may be paying more than you were with your original policy.

If you keep a policy for 3+ years, many companies offer a loyalty or longevity discount. That discount will stick around rather than falling off in a year, so the lower premium will last.

Another reason to avoid constant switching is your insurance score.  An insurance score is determined by credit, claim history, insurance history, and more.  Your individual insurance score determines the rate you pay for your policies.

Read more about insurance scores in our blog Insurance Score: What Is It And Why Does It Matter?

When you change insurance companies often, it lowers your insurance score. By remaining with one company for 3-5 years, your insurance score will improve.

You can lower your premium in the long run by switching insurance less often.

Mistake #3: Forgetting to cancel your old policies.

If you buy a new policy, you might assume your new agent will cancel your old policy. Unfortunately, that isn’t usually possible.

Most insurance companies require a signed cancellation form. That means you’ll need to be the one to call and cancel the policy.

To make sure the process goes smoothly, these are the steps I recommend taking to cancel your current policy:

1. Call your current company a week or two before your new policy starts.  Request the cancellation form and to stop any automatic payments.

2. Your cancellation date should be the same as your new policy effective date. Not the day before or after.

3. Don’t return the signed cancellation form until your new policy is in place. That way if there are any hiccups with the new policy, you don’t have a lapse in coverage.

4. Check your bank account or mail box for any refunds from your cancelled policy.

Mistake #4: Not replacing your old auto ID card with the new one.

As soon as you get a new policy, put your auto Id card in your glove box.

You are required by law to have proof of active insurance when you are driving any vehicle. If you forget to put your new Id card in your glove box, you could get a ticket for driving without insurance.

I recommend saving a copy of your Id card on your phone as well.

Mistake #5: Not keeping your mortgage company or auto lienholder in the loop.

It’s important to make sure your mortgage company or lienholder knows you’re insured. If they think your coverage has lapsed, they might force-place coverage.

Force-placed coverage ensures the bank’s investment is protected. In actuality it provides very little coverage for you and is quite expensive.

To avoid force-placed coverage:

1. Call your mortgage company or lienholder as soon as you switch insurance.

2. Let your new insurance company know that you have a mortgage or lienholder. You can have them listed on the policy to ensure they receive proof of your new insurance.

If you think it might be time to look at other insurance options, give us a call. We will do the work to find you the best coverage for the best value.

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