It’s quite common that people will wait until the date before renewal to cancel their insurance policy to avoid any penalty fees. However, sticking with your insurance policy to avoid a penalty, may actually be the worse of the two choices!

Here’s what you may want to consider when you’re contemplating a switch in your insurance policy…before the renewal date.

Ask for the specific cost of the “penalty.”

The penalty rate could be $20, $500, or any other rate. It’s hard to give a definitive price, because just like policies vary from person to person, so do the penalty rates. Talk to your insurance agent before making this decision, because you may find you can switch policies sooner, rather than later. 

Compare the annual cost of the new policy to the annual cost of the policy you want to cancel.

A good number to keep in your mind is 10. If the difference in cost is under 10% for the year, your insurer would be more inclined to help you make the switch or even match the new price. In the grand scheme of things, 10% should not make a drastic difference to an insurance company.

If your company is still hesitant or denies matching the penalty price, then bust out those math skills and calculate whether or not you come out ahead after paying the penalty and what your new rate would be. If you come up ahead – you win, if you come up even – you win, if you come up close to even – you sort of win! In all seriousness, you need to do this and decide if it’s worth it to you, because at the end of the day, it’s your money and your policy. 

Compare the differences in policy advantages and coverage between the new policy and your current one.

Agents from the two different policies should help you locate the top perks and the downsides to the policies you are considering. If the policy you are hoping to switch to has services or features that better suit your lifestyle needs, it may be worth paying a one time sum to make the switch. 

Understand payment terms.

Insurance companies have varying payment policies. You should make sure to study the terms of these policies and find the one that works best for you.

Determine if there will be consequences on other policies as a result of canceling the policy in question.

Many people are surprised when they are hit with the reality of the multi-policy perk no longer working for them. This comes about when someone makes the choice to split their insurance policy between two different insurers, and they no longer get that bundled policy discount.

For instance: You have your home and auto insurance under one insurer, so they give you a nice discount that brings the two rates down and makes your wallet happy. Then you find another insurer that can get your home insurance at a far more discounted rate, so you make the leap and unbundle your policies with your initial carrier. Your next bill comes around, and you are shocked to see that your home insurance rate may be lower, but your auto rate has suddenly jumped and you’re actually paying more now! This is another thing you’ll want to discuss with your insurer before making a switch, because who wants to pay more for their insurance when they thought they would be paying less?

Article written by contract writer and digital media coordinator: Candace Cox. You can reach her at socials@howardwebbins.com or candacecox96@gmail.com.