Can You Change Insurance Company While a Claim is Being Settled?

You get into a car accident and file a claim with your auto insurance company. As the claim process drags on, you start to get frustrated with how your insurer is handling things. Can you legally switch to a new insurance company mid-claim? Or are you stuck until the claim gets fully settled?

The answer is – yes, you generally can change insurance carriers even if you have an open claim that is still being settled. However, there are some important factors to consider before doing so.

How Switching Companies Works with a Pending Claim

If you decide to switch insurers while you have a claim in progress, here is what will happen:

• Your new insurance policy will only cover damages from accidents that occur after the new policy starts. It will not apply retroactively to your existing claim from a prior accident.

• Your open claim will stay with your old insurance company. The new insurer will not take over or manage the pending claim.

• You will still need to communicate with your old insurer to provide documentation, respond to inquiries, and ultimately settle the claim.

• Any negotiated claim settlement will still be paid out by your old insurance company, not the new company.

• Your new insurer will need to be informed about your open claim during the application process. This claim history will likely impact your new policy rates.

So essentially, you are free to switch companies but it creates a disjointed process where you need to juggle communications with two different insurers through the settlement process.

The Drawbacks of Switching with a Pending Claim

While you can change insurance companies mid-claim, there are some downsides to doing so:

• Higher Rates Sooner – Getting into an accident causes your insurance rates to rise upon renewal or when switching companies. If you switch right after filing a claim, your rates with the new company will spike up much more quickly.

• Pre-existing Conditions Clause – Your new insurer may impose a pre-existing conditions clause, restricting coverage for that prior claim. Make sure your new policy does not exclude or limit coverage for damages related to your pending claim.

• Loss of Loyalty Discounts – Long-time customers of an insurance company can earn loyalty discounts. Switching companies means starting from scratch and losing your tenure with the prior insurer.

• New Deductibles – You may have already paid toward your deductible on your existing claim. Switching companies could mean paying a brand new deductible all over again.

• Cancellation Fees – Depending on your old policy terms, you may be charged a cancellation fee for switching companies mid-term.

Unless your current insurer is completely mishandling your claim or providing awful customer service, it may be worth sticking out the claims process before switching to avoid these drawbacks.

Timing Matters

To avoid gaps in coverage, do not cancel your existing policy until the exact day your new coverage starts. Having continuous coverage is crucial in case any new damages related to your accident emerge.

Also be aware that most insurance policies have clauses requiring you to promptly report any claims. Make sure to file the claim and provide all details to your original insurer, even if you do switch companies shortly after.

If you wait a long time file a claim with your old company for damages that occurred during their active policy period, they can deny coverage for failing to promptly report it.

Shop Carefully When Switching

If you do decide to switch insurers mid-claim, be very careful in choosing a new company. Make sure to compare multiple quotes, looking closely at factors like:

• Rates for drivers with recent claims or accidents
• Customer service reputation
• Claims handling process and technology
• Discount opportunities to offset rate increases

Avoid simply going with the cheapest rate, since service quality will be crucial during your ongoing claim. Instead, look for an insurer known for smooth claims resolution.

Alternatives to Switching Companies

Switching car insurance providers amidst a claim is disruptive and can lead to higher rates. Here are some alternatives to consider first:

• Communicate concerns – Have an open discussion with your claims adjuster about any frustrations or issues with the process. See if concerns can be resolved without the need to switch companies entirely.

• File a complaint – Each state has a Department of Insurance you can file complaints with if you feel an insurer is acting in bad faith or slow-walking a legitimate claim.

• Wait it out – Stick with your current company just until the existing claim is finalized, then switch after that for a cleaner process. This avoids overlapping insurers.

• Cancel add-ons – Rather than switch companies, you may be able to lower your premium by canceling extra add-on coverages you don’t really need.

• Adjust deductible – Raising your deductible can lower your rates with your current insurer without jumping ship. Just be sure you have savings to cover the higher deductible amount.

• Take a class – Completing a defensive driving course can sometimes lower rates slightly. Check with your insurer if this discount option is available.

The Bottom Line

While you can legally change auto insurance companies mid-claim, it adds complications. For most people, sticking with the existing insurer through closure of the current claim leads to a smoother process and avoids drawbacks like pre-existing condition clauses on a new policy.

However, if the existing company is providing egregiously poor or unethical service, switching may be your best recourse. If you do decide to change insurers, be extremely careful in selecting a new provider and fully understand how it will impact your pending claim.