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Switching car insurance can save a third of your annual costs — here's how to do it

Heather Petty February 5, 2026 at 1:41 AM

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Switching car insurance can save a third of your annual costs — here's how (standret via Getty Images)

Shopping for a new car insurance policy can be pretty straightforward. But if you're like most drivers, you might skip it because the whole process feels overwhelming or time-consuming.

That reluctance could be costing you hundreds of dollars every year. Car insurance premiums have climbed steeply over the past two years, jumping 12% in 2025 alone. Add in tariff-related cost increases for auto parts and repairs, and your monthly premium could face even more pressure going forward.

The good news is that switching carriers doesn't have to be complicated. And the payoff can be substantial. Drivers who shop around and switch save a median of $461 per year, almost a third of what most people pay annually for coverage.

Here's how to switch carriers without the stress and why it might save you more money than you think.

⭐️ Must read: Best car insurance companies: AOL editor picks for rates, claims and more

Why loyalty doesn't pay (but shopping around does)

Those small loyalty discounts at renewal might actually be costing you money. First, rate deductions rarely make up for the annual increases to your premiums. And if your carrier is among insurers using controversial price optimization models to set those premiums, not to mention more sophisticated algorithms with the rise of AI, your company could be charging you more as a result of your loyalty.

Price optimization uses your personal, non-driving data — like brand loyalty, shopping habits and even the magazines you subscribe to — to determine the top possible premium you can be charged while still maintaining loyalty to your carrier. In short, it’s designed to predict how likely you are to shop around, optimizing policy pricing for the insurer, and not for the customer.

This type of pricing model is just one of the many reasons you should shop around at least once a year. But there are other situations that might call for a new auto insurance policy.

New drivers. Whether you’re getting married and combining policies or your child has finally gotten a learner’s permit, shopping for new quotes from a range of carriers can help you get the best terms for your new coverage needs.

New vehicles. If you’ve recently purchased a car off the lot, one that’s used but new to you or a specialty vehicle like a motorcycle, RV or mobile home, finding a new insurer can help you avoid overpaying for coverage changes to your policy.

Major life changes. Taking on a job with a shorter commute, retiring, driving less than 7,500 miles a year or moving to a new state or ZIP code can all affect your driving habits — and the way your insurance company calculates your premium.

A shifting economy. With tariff policies shifting rapidly and uncertainty about which ones will stick, it's wise to stay proactive — and get ahead of higher insurance premiums.

A bad claims experience. Whether you didn’t get the payout you expected or just had a hard time making a claim, it may be time to read customer reviews and find a carrier with stronger customer support.

Improved credit. Only a handful of states prohibit car insurers from using your credit-based insurance score to calculate your premium. So if your financial health has improved your FICO score, it could make for a substantial difference in the premium you pay to compare insurance quotes.

🔍 Learn more: When’s the best time to shop for car insurance? (Hint: It could be right now)

5 steps to switch to a new car insurer

Making the switch to a new car insurer can sound daunting at first, but you could be missing out on more than $460 in savings a year by staying with your current carrier, according to Consumer Reports — especially if you’ve had the same policy for decades.

Here’s how to shop for a new policy and get the best rates for the coverage you need, one step at a time.

Step 1: Know what you're currently paying for

Start by pulling up your current insurance policy — either online or from your files — to understand the coverage you're paying for. Think about changes you might need going forward so that you can get quotes tailored to your lifestyle and driving habits.

Look for any cancellation fees or penalties you can expect if you decide to change carriers. If you’re too early in your current policy, your insurer may charge a fee of up to $50 to cancel.

Step 2: Shop around for competitive quotes

The internet makes it easy to shop for a new policy without a phone call — just enter your ZIP code, vehicle details and coverage preferences for personalized quotes from multiple insurers.

Before signing up, don’t be afraid to read online customer reviews on the companies or agents you’re considering for unbiased insights into what you can expect, paying close attention to reviewers who live in your area. You don’t want to end up with a lower premium that comes with lousy customer service or a cumbersome claims process when you most need the help.

Step 3: Sign up for your new policy

If you’re comparing quotes online, most insurers allow for signing up for your new policy with the click of a button. Provide personal information, like your address and driver’s license number, but also details on the cars you’re insuring — including vehicle identification numbers (VIN) and odometer readings. Be ready to share your driving habits too, like how far you typically commute or how much you drive each year.

If you’re working directly with an agent, you'll provide all these details directly to your new insurer.

Step 4: Update any lenders and cancel your old policy

If you’re still paying off a car that’s part of your new policy, you’ll need to notify your auto lender of the change in policies. You should also confirm the cancellation with your old insurance carrier — even if your new insurer offers to cancel the policy for you.

Depending on when in the month you start your new policy, you could be due a prorated refund from your last payment with your previous insurer. Your cancellation call can also be the perfect time to ask about that.

Step 5: Get your new proof of insurance

Most insurance carriers provide temporary proof of insurance online, by email or through an app that you can print out and use while waiting for more permanent cards. If it’s not automatically offered, make sure to ask for it so that you can have it on hand in the unlikely chance you need to show proof within your transition period.

🔍 Learn more: Is bundling your insurance worth the discount? The pros and cons of one-stop policies

When's the best time to switch your car insurance?

There's no right time to switch — you can change car insurance providers any day of the year. But some life events and policy changes offer particularly good opportunities to find better rates.

Right before your policy renews

The sweet spot for switching carriers happens before your current policy expires. Shopping early gives you time to compare offers thoroughly and may lead you to better rates with a different provider. Many insurers like Progressive and Liberty Mutual offer "early shopper" or "quote in advance" discounts when you shop for a new policy before your current one expires or ahead of the start of your new policy.

After big life changes

Your insurance needs and discounts often change after significant life events. Moving to a new neighborhood or state can substantially impact rates since location heavily influences premium calculations. Getting married often qualifies you for lower rates as married drivers statistically file fewer claims. Adding or removing drivers from your household changes your risk profile, while paying off your car loan might allow you to adjust your full coverage.

Retirement or reducing your commute distance can qualify you for low-mileage discounts. Getting a new job, working remotely or any change that reduces time on the road are excellent opportunities to shop for better rates.

When your credit improves

In many states, a better credit score may translate to lower insurance premiums. If your score has improved significantly, don't wait until renewal — start shopping now to explore your new rates. Many drivers have seen substantial premium reductions after their credit scores increased, while keeping identical coverage.

After car insurance hikes

When your renewal notice from your current insurance company includes a hike in your premium, that's the sign to start shopping for a new policy. Rate increases tend to ripple across the industry, but they don't hit all companies at the same time — or even equally.

⭐️ Yes, you can cancel and get a refund even after paying in full

Even if you've paid for a six-month or yearlong policy ahead of time, you can still switch and get your money back. Insurance companies prorate refunds based on your cancellation date, so you'll receive the unused portion of your premium.

If you paid $1,200 for a 12-month policy and cancel after 3 months, you’d get a refund for the remaining months — around $900 back, minus any cancellation fees. You can use that refund from a paid-in-full policy toward new, less expensive coverage.

A few companies charge cancellation fees when you switch midpolicy. For example, while GEICO and Nationwide typically don't charge cancellation fees, Travelers may charge fees in some situations. These fees can vary based on how much time remains on your policy.

The refund process can take one to two weeks, with the money returned to your original payment method or sent as a check. Just make sure your new policy starts before canceling your old one to avoid any coverage gaps.

🔍 Learn more: 9 age-smart ways to save on car insurance (that can apply to all drivers)

4 common mistakes to avoid when switching

Keep the following tips in mind as you go through the process of shopping for quotes and switching car insurance carriers to avoid any time-consuming errors or costly mistakes.

Know your state’s minimum insurance requirements. Your new carrier shouldn’t let you sign up for anything less than the required coverage. But some states have higher requirements than others. And you don’t want to end up in trouble for failing to meet the minimum.

Take advantage of every discount you can. Before you agree to any new policy, make sure you aren’t missing out on discounts or special deductions that can save you money. A few to ask about include pay-in-full or autopay discounts, military or professional membership discounts, discounts for anti-theft or vehicle safety features or defensive driving discounts.

Mind any gaps in policy dates. You also don’t want to end up paying for two policies during the transition period, so make sure the effective date of your new policy term is coordinated to start just after the cancellation or renewal date on your old policy.

Don’t accept less coverage than you need. If a quote sounds too good to be true, it’s possible the new policy could be missing important coverage you need. Double check all the details of your current policy’s liability, comprehensive and collision coverage as a blueprint to make sure you have the full coverage you want.

🔍 Learn more: Surprising situations your car insurance won't cover (and how to stay protected)

My personal story: How shopping around helped me save with my current insurer

I’d used the same auto insurance company since I got my license at age 18 — first under my parents’ policy, then on my own. The agent was a friend of the family, and in the few instances we needed coverage, the carrier really came through for us. My agent had given me loyalty discounts, but they didn’t stop my premiums from going up year after year. During a recent overhaul of our finances, I decided to shop around and see if I could be paying less for our auto and home insurance policies. Of the three quotes I received, two insurers offered to cut our monthly premiums in half for the same coverage on our current policy.I could’ve just signed up for one of the new policies. Two of the companies even offered to cancel my current policy for me. But because I like my current agent, I decided to leverage those quotes to get a lower rate from my current carrier. And it worked: My next month’s bill will be half of what I was paying with no loss of coverage.It’s definitely worth it to shop around, even if you’re reluctant to move your coverage to a new insurance company. You could end up using them to save money with your current insurance company instead.

Beyond switching: 7 more ways to cut your premium

In addition to your carrier’s advertised discounts, there are a few steps you can take to save even more on your car insurance.

Bundle your policies. Most auto insurance carriers also offer homeowners insurance, renters insurance and other policies. And many are willing to offer you a discount if you bundle those policies together under their umbrella.

Pay biannually instead of monthly. If you have the cash to do it, you can save as much as 15% by paying six months of premiums up front.

Take a defensive driving course. Defensive-drivers courses are inexpensive and on average can save you from 3% to 10% on your premium for up to three years.

Enroll in a low-mileage or usage-based insurance (UBI) program. Whether you’re retired or working from home, the less you drive, the more you can save. UBI programs typically use a smartphone app, easy-install monitoring device or other telematics to track how much and how safely you drive. (Just understand how these telematics programs work to determine whether the discount’s worth it for you.)

Increase your credit score. If your state is among the majority that allow insurers to use your credit score to determine your premiums, improving your credit could help save you some money.

Limit your insurance claims. If the repair costs are less than your deductible, you may consider paying for it without a report to your insurance carrier. Claims can stay on your record for three to five years, and even a minor claim can raise your rates.

Increase your deductible. Raising your deductible from $500 to $1,000 can significantly lower your monthly premiums. Just make sure you have a healthy enough savings in an emergency fund to cover the higher cost if you need to file a claim.

🔍 Learn more: Car insurance myths: Red cars, rate negotiations and other popular misconceptions

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Telematics car insurance: Is the discount worth sharing your driving data?

How to get a defensive driving discount on your auto insurance

FAQs: Shopping for coverage and staying protected

Learn more about how auto insurance quotes, policies and rates work with these common questions. And take a look at our growing library of personal finance guides that can help you save money, earn money and grow your wealth.

Will my auto insurance policy cover guest drivers?

Most insurance policies cover friends and loved ones who borrow your car occasionally, thanks to what insurance companies call "permissive use." This means if you give someone permission to drive your car, your policy usually extends coverage to them. However, important limitations and considerations exist, especially for longer stays or frequent borrowing. Learn more in our guide to guest drivers and car insurance.

Do I need to change my car insurance if I move to another state?

Not necessarily. If you’re relocating within the same insurance company's coverage area, you might only need to update your existing policy or get a new policy for the new state with the same company. That said, your insurance company might not always offer the best premium in a new state as rates can vary significantly by location. That’s why you should still compare quotes from multiple auto insurance providers before deciding to stay with your company. Learn more about how to move car insurance, license and registration to a new state.

Is there ever a time when I can drop full-coverage car insurance?

While full coverage can definitely provide greater financial security and peace of mind for many drivers, there may be situations where it may be costing you more than it's worth — for instance, if you drive a low-value vehicle or you own your car outright. Learn more about when liability, comprehensive and collision coverage makes sense, and when it might not be the best choice for your needs and budget, in our comprehensive guide to full-coverage car insurance.

About the writer

Heather Petty is a finance writer who specializes in consumer and business banking, personal and home lending, debt management and saving money. After falling victim to a disreputable mortgage broker when buying her first home, Heather set on a mission to help people avoid similar experiences when managing their own finances. Her expertise and analysis has been featured on MSN, Nasdaq, Credit.com and Finder, among other financial publications. When she's not breaking down the complexities of finance, she's a young adult mystery writer of an internationally acclaimed series — and counting.

Article edited by Kelly Suzan Waggoner

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Source: “AOL Money”