Look Before You Leap: How to Renew Your Car Insurance Policy

By Jessica Bosari
After 13 years in personal and commercial insurance, Jessica Bosari now writes about personal finance, car insurance, risk management and related topics. Since 2008, she has been simplifying complex ideas through engaging articles for her readers.

How to Renew Your Car Insurance PolicyTruthfully, renewing your car insurance policy is a cakewalk. But if you want to save money, you’ll do more than go through the motions, sign a paper, and keep on as you have been. Smart drivers take the time to shop around every year, without fail. Here’s how to make sure you only pay as much as you have to when you renew your auto insurance policy.

Loyalty Discounts Not So Valuable

As it turns out, the loyalty discount you’ve been clinging to like a life raft might be sinking your savings. The J.D. Power 2014 U.S. Insurance Shopping Study reveals that the longer customers stay with an insurance company, the more likely they are to save money by switching. Those who switched after being with the same company for 11 years or more saved an average $426 in annual premium by jumping ship. So, it seems, the more times you mindlessly renew your car insurance policy, the more likely you are to be overpaying for car insurance.

Not Everyone Saves a Ton

It’s important to remember that those ads begging you to switch car insurance companies, telling you that you’ll save hundreds, are looking at the best-case scenario – the one where you’ve been with your current car insurance company for more than 10 years. So, if you decide to shop around every year at renewal, you probably won’t save hundreds of dollars by switching. But if you save $50 one year, $100 the next, you do benefit. You just don’t see it all in one shot. Often, people’s misconceptions about how much they can save leaves them feeling bad about switching because they didn’t save as much money as expected.

The Right Way to Renew

The hardest part about renewing car insurance is giving yourself time to shop around before the old policy expires. If you pay your premium in full at the beginning of the policy year, set a date for 11 months after the policy began so you have a few weeks to shop around before the policy renews. If you pay in installments, your last installment payment is a signal to you that you only have about 60 days to get a new policy. Use these signals to start your car insurance hunt.

If you have an independent car insurance agent, let them know that you want to shop the rates every year at renewal. Your agent can then get you several quotes instead of automatically sending you renewal paperwork every year. The general consensus is that you should get three car insurance quotes before making the decision to buy. You can get quotes from your agent, online, or directly through an insurance company.

Remember, though, It’s not the end of the world if you forget to shop around and end up renewing just because you don’t have time to shop. It’s not like health insurance where you have to wait for an enrollment period. You can switch insurance companies any time you want. In fact, if you like, you could use your renewal as your reminder to shop around. It won’t hurt anything to switch a month after you renew the policy and if you decide not to switch, there’s no pressure to rush in your renewal paperwork.

Check Customer Service

Although grabbing the lowest rate saves you the most money on premium, it might come back to bite you if there is a claim or a customer service problem on your policy. Take the time to review the ratings of the insurance companies you have quotes from before deciding. Here’s what to look for in reviews of car insurance companies. Unfortunately, one of the pitfalls of changing insurance companies is that you’re taking a chance on a new company every year in an industry widely known for customer service troubles. Switching often means that sooner or later, you’ll end up with a dud.

Getting Quotes Doesn’t Mean You Have to Switch

There’s a good chance that you get three good quotes, all cheaper than your current policy, but all from companies with notoriously lousy customer service. If this happens, there’s no law that says you have to switch. The savings could be enough for you to switch anyway, or you might decide that, for a $50 a year difference, taking a chance isn’t worth it.

Things to Do When You Renew

Whenever you shop for insurance, take these steps to be sure you have the right coverage at the right price:

Check your Policy Limits

You should be buying the highest liability limits available. It only costs a few dollars to increase your limits, and it could save you from serious financial disaster.

Proofread Quotes

When you get a quote, it’s common for the company to send an artificially low quote with coverage that doesn’t match what you asked for. Make sure you’re comparing apples to apples when reviewing car insurance quotes. Check the policy limits and deductibles to be sure they are the same as what you have now.

Decide if You Still Need Physical Damage Coverage

If you have an older car that’s worth $1,000 or less, it makes little sense to carry collision or comprehensive coverage. It’s cheaper just to set aside a few thousand dollars in an emergency fund to buy another junker if yours is totaled in an accident.

Confirm Drivers

Sometimes mistakes happen at renewal. The company might drop a driver off the policy that should be there, or you might pick up a new driver and forget to tell your company. Review the listed drivers on your policy at renewal to make sure you never have to worry about an uncovered accident claim.

Shopping for Car Insurance at Renewal Is a Smart Way to Save Money

Your car insurance renewal stands out as a memorable event in the year, making it the perfect time to shop around for better car insurance rates. If you never take the time to look around, you’ll never know what you’re missing.