Can You Change Your Homeowners Insurance After Closing?

Homeowners insurance is a financial safeguard designed to protect your home and belongings from unexpected events like fires, storms, or theft. When purchasing a home, securing an initial policy is a mandatory step, often arranged quickly to satisfy lender requirements. Homeowners can change their insurance policy after closing to adjust coverage or cost.

Understanding Your Ability to Change Policies

Homeowners possess the flexibility to change their insurance policy at any point after the home closing, not just at renewal periods. This ability is important because the initial policy selected during the homebuying process might have been chosen under time constraints, focusing primarily on meeting the mortgage lender’s requirements rather than the homeowner’s specific needs or finding the most competitive rate.

A primary reason involves seeking a better rate, as premiums can vary significantly between providers for comparable coverage. Homeowners might also find their current coverage inadequate or excessive after settling into their new property, necessitating different coverage limits or additional protections for new assets or renovations. Dissatisfaction with an insurer’s customer service or a desire to bundle policies, such as home and auto, with a single provider for potential discounts can also drive a change. Changes to the property itself, like significant renovations, additions, or security upgrades, can alter insurance needs and potentially qualify for new discounts, making a policy review beneficial.

Steps to Switch Homeowners Insurance

Review your existing policy to understand its current coverage limits, deductibles, and terms. This provides a baseline for comparison. Next, gather necessary information about your home, such as its construction details, square footage, safety features like alarm systems, and any recent upgrades.

Obtain quotes from multiple new insurance providers to compare policy terms, coverage levels, and premiums. When comparing, ensure that the proposed policies offer comparable dwelling coverage, which is the primary requirement from mortgage lenders, and consider additional coverages like personal property or liability protection. Once you have selected a new insurer, purchase the new policy, making sure the effective date aligns precisely with the cancellation date of your old policy to prevent any lapse in coverage. After the new policy is active, formally cancel your old policy by contacting your previous insurer, often requiring a written request.

Important Considerations When Switching

When changing homeowners insurance, particularly with an active mortgage, informing your mortgage lender about the policy change is an important step. Lenders have a financial interest in your property and require continuous insurance coverage to protect their investment. They are listed as a “mortgagee” or “interested party” on your policy and need to be notified of any changes to ensure their records are updated. Providing them with the new policy’s declarations page and effective date helps avoid potential issues, such as the lender force-placing coverage if they believe your home is uninsured.

If your insurance premiums are paid through an escrow account, the process involves additional coordination. Your mortgage lender manages the escrow account, collecting a portion of your monthly mortgage payment to cover property taxes and insurance premiums. When you switch policies, the new insurer will send the bill directly to your lender for payment from the escrow account.

If the premium for your new policy differs from the old one, your escrow payments may be adjusted accordingly, potentially changing your overall monthly mortgage payment. You may receive a prorated refund from your old insurer for any unused portion of the premium. While you might receive this refund check directly, it is generally advisable to send it to your mortgage servicer to replenish your escrow account, preventing a potential shortage that could lead to higher monthly payments later.