We're all about choice these days, which is one of the reasons consumer service providers are so keen to rope us into long-term contracts. But what about car insurance policies? How free are we to switch insurers before our existing policy has expired?
There are a multitude of reasons you may choose to switch insurers:
- you're dissatisfied with the service you're getting from your current insurer
- you are changing vehicles or moving interstate
- your circumstances qualify you for other benefits offered by another policy
- you change jobs and are eligible for a group discount with your employer's insurer
- you find a better policy, which will cost you less money.
Policy comparison tools make it easy for consumers to survey the options, which has made the car insurance market a keenly competitive one.
Cancelling Your Old Policy
Most standard car insurance policies will allow you to cancel your policy at any time provided you give them proper notice. However, like most service agreements, you may have to pay a cancellation fee. The insurer may deduct the fee from any refund owing to you or if the refund is less than the fee it will simply not be issued.
The cancellation fee may only be waived if you are switching to another policy provided by the same insurer or if you are cancelling your policy in the ‘cooling off’ period (just after purchase or around the time of renewal).
The best way to avoid this cancellation penalty, not to mention the administrative hassle, is to make your switch when your current policy comes up for renewal.
Check with your current policy provider about what they will require in order for you to cancel your policy. Most likely, you will need to confirm your intentions in writing and specify the date you want the policy terminated. You may also have to complete a policy cancellation form.
Making the Transition
The best time to make the switch is just before your old policy is due to expire. Not only will this negate the issue of cancellation fees, it will also save you money on administrative fees normally associated with the renewal process. So ring your current insurer about a month before renewal time and notify them of your intention to cancel your policy. They may even be able to review your particulars and offer you an alternative policy that may be new and therefore unfamiliar to you.
If you proceed with the switch, make your cancellation a clean one and be careful to coordinate the dates between termination of the old policy and activation of the new one. Otherwise you may find yourself in uninsured black hole. This sort of coverage gap, while temporary, can leave you fully exposed and may also have ramifications with things like vehicle purchase contracts, which often require proof of coverage.
Your Money, Your Choice
As a consumer in a free market you are well within your rights to shop around and switch policies at your discretion. In fact, a regular review of your car insurance coverage is the best way to maximise your value for money.
- Regularly review your car insurance coverage and what the competitors are offering.
- Be sure the switch is worth it.
- Before you switch, give your current policy provider a chance to offer you a better deal.
- Check the terms and conditions of your current policy to see if cancellation penalties apply.
- Make sure you comply with the formal cancellation procedures of your policy.
- Check how long it will take to have the new policy activated.
- Avoid coverage gaps; validate your new policy before your old one is cancelled.
- Cancel your old policy at the end of a payment cycle so you don't have to recover any unexpired portion of your paid premium.