One of the best ways to make sure you’re getting the best deal on homeowners insurance is to periodically comparison shop and check if you can get a better price with a different insurer. If you do find a better deal then you might be ready to ask: “Can I switch home insurance?”
The good news is that yes you can. Switching home insurance is perfectly legal. But if your mortgage lender requires you to have a homeowners insurance policy (which is almost always the case) you’ll want to make sure you’re following the right steps. Read on to learn how to change homeowners insurance seamlessly to save money.
How to switch home insurance
Switching home insurance is a fairly simple process. To do so, follow these five steps explaining how to switch home insurance:
1. Decide whether switching home insurance is the right choice
Before you switch homeowners insurance, it’s crucial to do your research so you can be confident you’re making the right choice. Read the fine print on the policies and make sure you’re comparing apples to apples. Are the policy limits on the new policy the same as or greater than your current policy? Are there any exclusions or hazards not covered in the cheaper policy? Are the deductibles the same? You want to make sure there are no surprises down the road.
You may find that the cheaper quote means less coverage or that your losses would be reimbursed as actual cash value instead of replacement cost coverage. Cash value pays for the depreciated value of your items, whereas replacement cost covers the cost to replace at current market prices. Consider whether saving a couple of hundred dollars per year is worth switching to a cash value policy.
2. Compare ratings
If the quote passes the test, do a little research on the new insurance company and how customers feel about it. You’ll want to look at how the insurer responds to and pays out claims. Take written reviews with a grain of salt — many customers don’t 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, as well as J.D. Power’s Customer Satisfaction Survey and Property Claims Satisfaction Study.
3. Look at your current policy’s effective dates
Look at your current policy’s homeowners insurance declarations page to find out when your coverage ends. You could switch at any time, but if you prepaid your policy for a certain period of time then it may be less of a hassle to wait on switching your home insurance until the policy ends. If you can’t wait, you can always cancel early and request a refund of the unused portion, but it may take a while to get that refund check.
4. 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. Go ahead and apply for the new policy and pay to endorse it before canceling your current policy. A new homeowners insurance policy typically takes one to three business days to take effect so you want to purchase the new one before canceling the old one in order to avoid a lapse in coverage.
You’ll be asked for an effective date on your policy. If you’ve decided to let your other current homeowners insurance lapse, enter an effective date to pick up where it left off. For example, if your current policy ends on June 30, you could set your new policy’s effective date to June 30. If you’ve decided to switch sooner, enter the date you’d like your new policy to take effect. Make note of the date — you’ll need to notify your current insurer.
5. Notify your existing home insurance company
Once you have a homeowners insurance declarations page and receipt of payment from the new insurer it’s time to contact your existing home insurer and let them know you’d like to cancel the policy.
You’ll need to call your current insurance company and say something along the lines of “I’d 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’d like your policy canceled as of May 15. You may receive some push back or a warning that your coverage will lapse. 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’ll 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’ll need to include. Draft a letter or email with your name, policy number, home address and contact information. State that you’d like to cancel your homeowners insurance policy effective on [date]. Save the sent email for your records or mail the letter with delivery tracking.
6. Contact the lender
If you have a mortgage, you’ll 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’ve switched insurance companies. You’ll need to email them a copy of your new homeowners insurance declarations page, payment receipt and copy of your original policy’s cancellation notice.
If you have an escrow account with your lender and they pay for your homeowners insurance from the account, it’s important to notify them right away so the lender directs payments to the new insurance company.
Frequently asked questions
Can I switch home insurance?
You can switch home insurance at any time, but there are important steps to follow. Purchase the new insurance first, then cancel your existing policy. Don’t forget to notify your mortgage lender of the change.
What is the homeowners insurance declaration page?
The homeowners insurance declaration page is your proof of insurance. It includes important information about your home insurance policy, such as the beginning and ending date of the policy, coverages, name and address of the insured location.
What do I need when changing homeowners insurance?
You’ll need proof of your new policy in the form of a homeowners insurance declaration page and the cancellation of home insurance from your original insurance company.
How do I know if switching home insurance is a good idea?
If you find home insurance for a lower price, you’ll need to evaluate whether it’s worth switching. Compare deductibles, what hazards are covered, the policy limit amounts and whether the new policy is replacement or cash value. If the new policy provides the same account of coverage or better, changing homeowners insurance is a wise financial decision. If the cheaper policy means you need to give up some features, you’ll need to decide if the savings are worth it.