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In today’s economy, everyone wants the best deal.

Insurance is no different. But if you’re thinking about switching from your current provider, there are important things to consider before making the jump, especially if it means cancelling your policy early.

Here are some common questions and answers:

Q. Can I switch my insurance?

A. Yes. The best time to switch is just before your policy is up for renewal. It will help you avoid cancellation penalties and allow for a smooth transition into your new policy.

Research is important. Comparing rates will tell you if you're overpaying, and by how much. It’s a good way to track what other companies are charging and make sure you aren’t paying more than you should.

Review customer experiences online. Be sure you are comparing policies with similar coverages, limits, deductibles, and other terms. At the same time consider convenience, such as whether you can refer to your policy online or whether there is a mobile app.

Your insurance broker can help shop the market on your behalf and make sure you are comparing apples to apples when it comes to the coverage you need.

Q. Can you switch insurers mid-policy?

A. Yes. But be advised insurance companies often charge a fee or penalty for early cancellation. You’ll need to know how much they are and whether the company you plan to switch to requires a down payment or any additional fees.

When all these figures are considered, you’ll have a better idea of the overall cost before you cancel early. To find whether you'll save money, calculate how much you will save over the policy term on premiums alone. Then, subtract the costs of early cancellation. If you come out ahead, then cancelling may be the right choice.

For the insurer, early cancellation means the loss of premiums and administrative costs. Read your policy for the exact information about your company’s rules and fees regarding cancellation.

Important: Do not just stop paying your premiums to your old insurer. If you do, it will ultimately result in the cancellation of your policy and could become a black mark on your record.

Q. How do I get my refund if I switch early?

A. When you cancel, there are two methods auto insurance companies can use to process refunds: short-rating and pro-rating. A pro-rated cancellation gives you back the entire amount of the unused premium, while a short-rated cancellation takes a certain amount out of the refund as a penalty for early cancellation.

The Financial Services Commission of Ontario allows auto insurance companies to use short rating to account for any administrative fees associated with cancelling the policy.

For companies using a pro-rated system, if you have a 12-month policy and cancel after three months, you will get back nine months' worth of premiums. However, if the company is short rating the cancellation, you will lose some of that remaining premium.

While exact short-rating fees depend on the policy, you'll likely pay more fees the earlier you decide to cancel. Before switching, ask the insurer which method they use and find out how much money you would lose if it’s a short-rating situation. You’ll need this figure to determine whether the savings on your new policy makes up for the difference.

Q. How do I change insurers?

A. Once you’ve found a new insurance provider that better meets your needs, put the new policy in place before cancelling the old one. Your insurance broker will do the paperwork and will get the new policy in place and let your old insurer know about the cancellation.

You will need to sign a new insurance application with the new company and sign a cancellation with the previous insurance company.

Important: Make sure you have no gap in coverage when changing insurers. Any period where you are uninsured can lead other insurance companies to raise your premiums down the road.

Q. Can I switch my home insurance too?

A. Yes. If you bundle your home (condo or tenant too) and auto policies together, you could save even more money. If you change your homeowner’s insurance policy, let your lender or company know. Send a copy of the new declarations page along with a copy of the cancellation of the old policy. If you have switched car insurance, in most cases, the insurance provider is required to report the new coverage to the Ministry of Transportation.