3 Signs It’s Time to Break Up With Your Car Insurance Company

Sometimes, it pays to be a loyal customer. Airline miles, loyalty reward points, anniversary freebies, the coveted platinum membership tier — all of these incentives are designed to keep you committed to your favorite brands. But loyalty is typically a one-way street when it comes to car insurance.

"Insurance companies are there to make money," says Michael DeLong, a research and advocacy associate for the nonprofit Consumer Federation of America. "They're not your friend, despite the cute mascots they have." DeLong advises not to hesitate to shop around for better deals because, in most cases, your insurance company isn't loyal to you.

However, only 26% of vehicle owners in the United States say they shop for car insurance at least once a year, according to a 2023 NerdWallet survey. 

Here are three signs it's time to swipe left on your current car insurance company. 

1. When your rates go up

It's normal to pay more for things over time — taxes, rent, a carton of eggs — and insurance is no exception.

Sometimes, price hikes are justified by your driving history (say you caused an accident or got a speeding ticket). But other times, they're based on things unrelated to driving, such as getting married or changing jobs.

Additionally, many car insurers practice something called "price optimization." DeLong describes it as "charging people higher rates and premiums based on the likelihood that they will accept that and not shop around for better deals." 

Price optimization tends to punish loyal customers most, DeLong says. But, in addition, it also hurts people who are simply less educated about insurance, which is a lot of people, he adds.

It's worth noting that price optimization is currently banned in some states, and not every company practices it. Still, insurance companies adjust rates for many reasons. So while a low-priced policy may have initially lured you in, that sweet deal may have already soured by the time you renew (typically 6 or 12 months later). 

2. When life happens

Insurance companies use all sorts of driving and non-driving-related signals to price policies, and pricing formulas differ from one company to the next. For example, some insurers charge higher rates than others for having a recent speeding ticket or for simply being a young driver.

That's why it's often a good idea to court other car insurers when you:

• Move.

• Get married.

• Buy or lease a new car.

• Change occupations.

• Add a driver to your policy.

• Get into a car accident.

• Get a DUI/DWI or traffic infraction.

• Experience a significant change in credit history (in most states).

• Need to drive less.

3. When you're treated poorly

There's more to insurance than finding a rock-bottom price. "You have insurance so that if a bad day happens, it doesn't become a worse day," says Stephen Crewdson, a senior director at J.D. Power. 

That's why paying attention to how your insurance company treats customers is essential. This is a tricky sign because, aside from the initial account setup, most people don't routinely deal with the insurance company or agent until one of those "bad days" occurs.

As a result of that experience, you may be dissatisfied because a claim took too long to process or you could not reach a customer service representative when needed, for example. If an insurance company treats you poorly, it should serve as a big red flag, says DeLong. Other companies may value your business more.

Keep the relationship open

Shopping for insurance, like dating, can be a daunting experience for some. Finding and switching to a more suitable car insurance company, on the other hand, can be a relatively painless process and most insurers will not penalize you for doing so — even if you're just one week into a 6-month policy. 

Here are some considerations for maintaining a casual relationship with your insurer:

Make shopping a habit

"Shop for insurance like you would shop for gas," says Marty Ellingsworth, executive managing director at J.D. Power. In other words, you should always keep an eye on your price because the market is constantly changing. You can count on prices to rise regularly, but you're entitled to ask why and seek transparency.

NerdWallet recommends shopping for car insurance from at least three different companies once a year. And don't forget the small, regional insurance companies, which can sometimes offer more competitive rates and better service. Working with an independent insurance agent is a great place to start. These experts work with multiple insurers and can find the best policy tailored to your needs. 

Shop for what you need

Start with figuring out what you need to insure and how much car insurance you need, Ellingsworth recommends. 

With car insurance, it's often easy to be over or underinsured. Some companies only offer certain features in packages, so you might end up paying for coverage you don't want or need. On the flip side, many states allow residents to drive with shallow coverage limits, which may leave them underinsured.

Most insurance companies or independent agents can help you with this part. But as a rough estimate, NerdWallet recommends getting at least enough liability insurance to cover your net worth. That's the value of all your cash, investments and the things you own, minus your debt.

Shop for quality

You can use the National Association of Insurance Commissioners, or NAIC, website to see how customer complaints stack up across different car insurance companies in your area. You can also check out NerdWallet's roundup of the best car insurance companies, which compares NAIC customer complaints and other details among top companies.