Car Insurance: Does Switching Really Save?

We've all seen the insurance ads. Switch from Geico to Allstate and save $394 on your auto insurance; switch from State Farm to Progressive and you could save $473. It sounds too good to be true. Does switching your car insurance company really affect your premiums that much? Well, yes and no.

First it's important to understand that those ads never say that every customer gets that much of a discount. Most of those ads use language more like, "average savings based on customers who say they've saved."

Second, it's important to understand that a good portion of the customers who saved money by changing companies probably made changes to their coverage as well. What are those changes? Well, they could include:

• switching to a pay-as-you-drive program
• taking a teen driver off their policy
• no longer including comprehensive coverage in their policy
• replacing their minivan with a sedan

The truth is, even without switching insurance companies, some or all of those changes would have netted most customers some kind of break on their insurance premiums.

Switching, however, also gave some of them the ability to reap "new customer" rewards - the special incentives that insurance companies offer to new customers in a particularly desired demographic (like an age group, job class, or zip code). These incentives could include reduced payments or even having things like rental car reimbursement free for the first year.

The bottom line? Switching insurance companies may save you money, but there's an equally good chance that tweaking your coverage with your existing insurance company could save you just as much.