If you have a mortgage on your home, your lender almost certainly requires you to have homeowners insurance to help protect their investment in your home. But while you’re likely required to have a home insurance policy by your mortgage lender, you aren’t required to stick with the same company year after year. You have the option to switch home insurance companies, and doing so is typically a relatively easy process.
That said, you need to know how to switch home insurance companies to avoid having a lapse or gap in insurance coverage. For most people, switching home insurance companies starts with comparison shopping, which is a great way to find out if you are getting the best deal on your homeowners insurance coverage. If you find out that you are not getting the best rate possible with your current company, switching companies may be the right solution.
How to switch home insurance
Switching home insurers is a fairly simple process. To do so, follow these seven steps:
1. Decide whether switching home insurance is the right choice
You may decide to switch to bundle your auto and home policies with your auto insurer, expand your home insurance coverage with more unique options or because you are dissatisfied with the level of service you have received from your current insurance provider.
Another common reason to switch may be cost-related. A quote from a different provider for the same level of coverage could be significantly lower. However, it is important that you take your time to review your quotes to make sure you are comparing the same coverages and that you would not be losing coverage. Before you switch homeowners insurance, it is crucial to do your research to be confident you’re making the right choice.
2. Compare ratings
To avoid disappointment with a home insurance company, looking into how others rate the carrier and how the insurer handles claims and complaints can be invaluable. If the quote passes the test, do a little research on the new insurance company and how customers feel about it. You may want to look at how the insurer responds to and pays out claims.
Take written reviews with a grain of salt — many customers do not review a company for doing a good job and only speak up after a problem. Some good sources for customer ratings include the Better Business Bureau, and J.D. Power’s Customer Satisfaction Survey and Property Claims Satisfaction Study, which are independent studies based on what policyholders have to say about their property insurers.
You can also get an idea of an insurance company’s financial stability by looking at AM Best scores. The credit-rating agency grades companies based on their financial strength. Companies with high scores have a higher probability of paying a large number of claims at once, as is the case after a disaster such as a hurricane or a wildfire.
If you feel overwhelmed by the number of resources and research needed, Bankrate simplifies the process by scoring carriers with a comprehensive weighted score based on reviews and ratings by reviewing:
- Credit agencies: AM Best, S&P, Moody’s
- Customer experience and complaint studies: J.D. Power, NAIC
- Average quoted rates: Quadrant Information Services
- User experience: Bankrate’s editorial team does extensive research on an insurance company’s online and mobile resources.
Find out which insurance companies made our list of the best homeowners insurance companies.
3. Compare your current policy to the new policy
Before switching insurers, make sure you understand what you are purchasing and what you are leaving behind. Read the fine print on both home insurance policies and make sure you are comparing apples to apples. To compare policies:
- Check the policy limits: Make sure you are aware of how the coverage limits change, especially since property insurers have their own way of calculating your dwelling coverage amount. This calculation will appear on your policy as your Coverage A amount and impact several other coverage limits on your policy.
- Look for exclusions: The terms and conditions may reveal exclusions or hazards not covered in the new policy. Most home insurers exclude flood and earthquake coverage in a standard homeowners insurance policy, but some insurers may have additional exclusions, such as exclusions for certain dog breeds.
- Compare deductibles: The deductible could save you money if higher, but make sure you can afford the larger cash outlay in case of a claim.
- Check on whether the policies are actual cash value or replacement value: It may be worth paying a little extra for replacement value so you can buy new versions of the damaged or lost goods instead of receiving a reduced, depreciated price.
4. Look at your current policy’s effective dates
Review your current policy’s homeowners insurance declarations page to find out when your coverage ends. If you time your switch wrong, you could end up with a lapse in coverage. Insurance companies and mortgage lenders do not like lapses — you may miss out on a continuous coverage discount with the new insurance carrier if you accidentally end up without home insurance for some days. In addition, a mortgage company could purchase coverage on your behalf if your insurance lapses — and the cost you will have to pay for premiums may not be competitive at all.
You can switch insurers at any time, but if you paid your policy for the year, like from your escrow account, then it may be less of a hassle to wait to switch your home insurance until a month or so before your renewal date. You can always cancel early and request a refund of the unused portion, but it may take a while to get that refund check.
5. Buy the new policy
Once you know the newer quote works for you and have an idea of when your current homeowners policy ends, it’s time to take action. You will be asked for an effective date for your new policy. You can set up your new policy to go into effect the same day as your current policy ends. However, do not cancel your current coverage before your new policy’s effective date. For example, if your current policy ends on June 30, you could set your new policy’s effective date to June 30. If you have decided to switch sooner, enter the date you would like your new policy to take effect and then cancel your current coverage for that same effective date.
6. Notify your existing home insurance company
Once you have a homeowners insurance declarations page from the new insurer, it is time to contact your existing home insurer and let them know you would like to cancel the policy.
You will need to call your current insurance company and say something along the lines of “I would like to cancel my homeowners insurance policy as of” and give them a date. If your new policy is effective as of May 15, you can say you would like your policy canceled as of May 15. If asked, you can explain you already have a new policy effective as of that date. If the insurer accepts your cancellation over the phone, ask for a letter or email confirming the cancellation. You will need it to notify your mortgage lender.
If you pay your home insurance directly and not through an escrow account, ask for details on any refund due to you on prepaid portions of the policy. If they automatically draft your premiums each month, ask about when the last draft will go through and how they will refund you the unused amount.
Some insurers may require you to cancel in writing. Be sure to note the email address or mailing address and what information you will need to include. Draft a letter or email with your name, policy number, home address and contact information. State that you would like to cancel your homeowners insurance policy effective on [date]. Save the sent email for your records or mail the letter with delivery tracking.
7. Contact the lender
If you have a mortgage, you will need to keep your lender in the loop. One of the conditions of your mortgage is to keep your home insurance policy up to date. If you pay for your homeowners insurance directly, call your lender to notify them you have switched insurance companies. You may need to email them a copy of your new homeowners insurance declarations page.
If you have an escrow account with your lender and they pay for your homeowners insurance from the account, it is important to notify them right away, so the lender directs payments to the new insurance company.