Can I get auto insurance if I owe another company?
If you want to switch car insurance providers, you can do so without penalty. You just need to make sure you pay off any outstanding balances with your current provider before switching.
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Written by
Rachel Bodine
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Reviewed by
Daniel Walker
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UPDATED: May 24, 2022
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When you own an automobile, it’s good to ensure that you have insurance coverage without any lapse. Yet sometimes, you may want to switch to another company when you still owe some money to your current provider. However, will you be able to make a switch if you owe an insurance company money?
If you’re shopping for new auto insurance coverage because you don’t think you’re getting the cheapest auto insurance rates for your needs, pay your old company off first.
Enter your ZIP code into our FREE online tool to get multiple quotes and start comparing your new rates.
Table of Contents
Can you switch providers if you owe an insurance company money?
Nothing stops you from switching providers if you still owe money to your current provider. If you find a better deal with another company, you may want to terminate coverage with your current provider and start to work with the new one. In this case, it should be as simple as calling your current provider as soon as you have formalized arrangements with the new company.
Your first insurance provider will then terminate your current policy, and you should have nothing to pay as most insurance is paid in advance.
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Can you owe money to an insurer?
It’s unusual for anyone to owe money to their insurer. In most cases, you pay for insurance coverage in advance, so you shouldn’t worry about falling behind. However, if you forget to make a payment, your insurance company will typically send you a reminder and give you a grace period to catch up.
Sometimes an insurance company will issue an endorsement causing a material change to the policy which may trigger an outstanding balance.
How do insurance companies structure payments?
You typically pay insurance payments in advance as the company takes the risk on your behalf when they confirm the policy. Underwriters assess individual policies based on how much risk they represent and then calculate a yearly rate. However, many providers are willing to let you make semi-annual or even monthly payments.
Does an insurance bill have a grace period?
Many companies will offer a grace period to give you time to submit your payment if you have forgotten to do so. Some organizations will provide you with 10 to 14 days, while others may offer an entire month. If you fail to pay, they’ll probably send you a formal letter advising you that they will be terminating your coverage due to non-payment.
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Can a default harm your credit score?
It’s never a good idea to default on a premium, so if you are switching insurance companies, ensure that you always make the final payment to your first provider. If they cannot recover that money from you, it may show up as a default on your credit report. Also, keep in mind that insurance companies check credit reports when writing a new policy, so this default may cost you more in the future through higher premiums.
Take a look at the table below to see how your credit score can affect your rates.
Auto Insurance Company Good Credit Score Fair Credit Score Poor Credit Score
USAA $1,821.20 $2,219.83 $3,690.73
State Farm $2,174.26 $2,853.00 $4,951.20
Geico $2,434.82 $2,986.79 $4,259.50
American Family $2,691.74 $3,169.53 $4,467.98
Nationwide $2,925.94 $3,254.83 $4,083.29
Progressive $3,628.85 $3,956.31 $4,737.64
Farmers $3,677.12 $3,899.41 $4,864.14
Allstate $3,859.66 $4,581.16 $6,490.65
Travelers $4,058.97 $4,344.10 $5,160.22
Liberty Mutual $4,388.18 $5,604.24 $8,802.22
As the data shows, you’ll get the best rates with a good credit score, while with a fair score, your rates can increase by up to an average of 31 percent. With a poor credit score, your rates may increase by as much as 127 percent.
Do insurance companies share information?
Remember that insurance companies check driver records when figuring rates. These companies share some of this key data, and if you apply for coverage with a new provider, they will be able to see your history. If they notice that you have a termination for non-payment, they may increase your premiums.
What if you have little or no money for insurance?
If you have difficulty paying for insurance, ask your provider about low mileage premiums or see if you qualify for any discounts.
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Bottom Line: Can I get auto insurance if I owe another company?
You can still apply for coverage with another provider, even if you owe some money to your current company. However, you should always pay any outstanding bills as a default could lead to issues with your credit score and higher premiums.
Whether you owe another insurance company money or not, enter your five-digit ZIP code into our FREE quote tool below to find auto insurance quotes so you’re ready to start a new policy as soon as you’ve closed out your old one.