Can You Change Homeowners Insurance at Any Time?

Homeowners insurance provides a financial safety net, protecting one of your most significant assets from unexpected events like fire, theft, or natural disasters. It offers coverage for the physical structure of your home, personal belongings, and liability for injuries that might occur on your property.

The Ability to Switch Homeowners Insurance

Homeowners generally have the flexibility to change their insurance provider at any time. This capability allows individuals to seek out policies that better align with their current needs or financial situation. Common reasons for considering a switch include finding more competitive rates, a desire for different coverage amounts, or dissatisfaction with a current insurer’s customer service. Homeowners might also explore new policies after moving to a different property, as coverage requirements can change with location and home characteristics.

When canceling an existing policy mid-term, there are typically no severe legal restrictions or substantial penalties. Most insurers provide a prorated refund for any prepaid premiums covering the unused portion of the policy term. While some companies might impose a small cancellation fee, often around 10% of the annual premium, this is not universally applied.

Steps to Changing Your Homeowners Insurance Policy

The process of changing homeowners insurance begins with thorough research and obtaining multiple quotes from various insurers. This step allows you to compare different policy options, coverage levels, and premium costs to find a policy that best suits your needs. When comparing quotes, it is beneficial to ensure that the coverage limits and deductibles are comparable across different proposals for an accurate assessment.

After selecting a new policy, the next action is to apply for and secure the new coverage. It is crucial to purchase the new policy before canceling your existing one to prevent any lapse in coverage. The effective date of your new policy should ideally align with or precede the cancellation date of your old policy. Once the new policy is active, you can then formally notify your current insurer of your intent to cancel. This notification should specify the exact cancellation date, and you should request confirmation of the cancellation and details regarding any prorated refund due.

Key Considerations When Switching Policies

Prorated Premium Refunds

When transitioning homeowners insurance, understanding how prorated premium refunds are handled is important. If you paid your annual premium upfront, your former insurer will calculate the refund based on the unused portion of your policy term. This refund typically arrives within a few weeks, often between 7 and 30 days, though processing times can vary by insurer. This refund may be sent directly to you or, if your premiums were paid via an escrow account, it might be directed to your mortgage lender.

Notifying Your Mortgage Lender

Notifying your mortgage lender about the insurance change is a necessary step, especially if your premiums are managed through an escrow account. Lenders require proof of continuous insurance coverage to protect their financial interest in the property. Providing your lender with the new policy’s declarations page and the cancellation notice for the old policy ensures they can update their records and adjust escrow payments accordingly. This helps ensure your new policy’s premiums are paid correctly from escrow.

Claims History and Future Rates

Homeowners should also consider the potential impact of their claims history on future rates. Switching insurers does not remove past claims from your record, which typically stay on file for five to seven years in databases like CLUE (Comprehensive Loss Underwriting Exchange). Insurers use this information to assess risk and determine premiums.

Reviewing Deductibles

Review the deductible amounts on the new policy compared to your previous one. Deductibles, typically ranging from $500 to $2,500, directly affect your out-of-pocket expense in the event of a claim and influence your premium cost; a higher deductible generally results in a lower premium.