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When you buy home insurance, you don’t need to stay with the same insurance carrier forever. You can change insurers at any point, ideally at renewal time.
You might want to switch insurance companies to change the type of coverage you have, lock in a better deal, or get better customer service. Even if you aren’t planning a switch now, it’s good to know how to change home insurance so that if you ever want to, you’ll know what to do.
Here’s what you need to know if you decide to change homeowners insurance:
- When to change homeowners insurance
- Steps to change home insurance
- 4 reasons to change insurers
- Potential downsides when changing home insurance
When to change homeowners insurance
You can change your homeowners insurance at any time. But the best time to do so is while your current policy is still in effect, near its expiration. Most policies are in effect for one year.
If you change insurers too early, you could incur penalties or fees, depending on the contract you have with your current insurer. Be sure to contact your insurance provider to find out if it charges an early cancellation fee.
If you change insurers too late, after your current policy has expired and before the new one is in effect, you’ll have a coverage gap. In that situation, if anything were to happen to your home, you wouldn’t be able to file a claim with either carrier. And if you have a mortgage lender, it’ll buy force-placed insurance for your home if you have a lapse in coverage — this means you may have to pay for a more expensive policy than you would’ve chosen yourself.
For these reasons, it’s best to have a new insurance policy in place before you cancel your old one.
Steps to change home insurance
Changing your home insurance carrier is an easy process, but there are some steps you’ll need to follow:
1. Review your existing policy
Before you switch providers, you should know whether you’ll incur any penalties or fees by terminating your policy early. Read the terms and conditions of your policy, which you can usually find on the policy declarations page, or contact your insurance agent.
2. Get quotes
When you start shopping for a new insurer, your goal is to improve your insurance situation. The best way to achieve this is to request quotes from at least three different carriers so you can compare coverages, deductibles, and limits.
Some insurance providers include a discount if you also insure your car with them, or carry another insurance policy with them. But cost isn’t the only factor to consider. You’ll want to choose a carrier with good customer service and a good rating.
3. Choose your policy options
You can customize your homeowners insurance to get the coverage you need. A standard policy covers many things, but you might want to buy additional coverage, such as flood or earthquake insurance. Here’s what a standard home insurance policy generally covers:
- Structure of the home: This covers your home if it’s damaged or destroyed by a natural disaster, such as a fire.
- Personal belongings: This covers furniture, clothing, jewelry, electronic devices, and other possessions if they’re stolen or damaged by a covered incident.
- Liability: This covers you if you or a family member cause bodily injury or property damage to others.
- Additional living expenses: This pays for costs like hotel stays and meals if your home is uninhabitable due to damage caused by a covered incident.
You’ll also need to select your level of coverage:
- Actual cash value: This replaces your home and belongings, minus any depreciation.
- Replacement cost: This replaces your home and belongings at today’s prices. It does not account for depreciation.
- Guaranteed or extended replacement cost: These two types of policies replace your home even if it’ll cost more than your policy limit. With guaranteed replacement cost, your home will be replaced no matter what it costs. Extended replacement cost increases your dwelling coverage by 10% to 50%.
4. Ensure there’s no lapse in coverage
It’s essential that you maintain home insurance at all times. Find out the date your policy expires, and have a new policy in place before it does. If you plan to cancel before your policy ends, ask if you’ll get a refund on any prepaid funds or whether you’ll need to pay any fees or penalties.
5. Cancel with your old provider
Once you have homeowners insurance with a new carrier, tell your current insurer that you won’t be renewing your policy. Make sure you get written acknowledgement from your old insurer that you canceled your insurance. You might get a prorated refund if you’ve paid in advance for your policy and you cancel before it expires.
6. Tell your lender
If you have a mortgage, your lender may pay your homeowners insurance through an escrow account, typically as an add-on to your mortgage payment. If you change insurance carriers, you need to notify your mortgage lender so that your lender doesn’t mistakenly pay the old insurer.
Your lender will tell you what you need to provide, such as the names of your old and new insurers and a copy of your new policy. Note that if you have a different rate with the new insurer, your mortgage payment should go up or down to reflect that change.
4 reasons to change insurers
Here are some common reasons people change home insurance providers:
If your insurance premium increases, or if you discover you can get similar insurance elsewhere for less, you might want to change insurers. Consider putting the extra money you would’ve paid your current insurer each month in a savings account. After a year, you’ll see how much money you earned just by switching carriers.
Some insurers offer incentives and discounts, such as bundling. With bundling, you get a better rate if you carry more than one policy with the same company, such as homeowners insurance and car insurance. Other common home insurance discounts include those for going paperless and for paying your 12-month policy in advance.
Some insurers provide better customer service than others. If you’ve had bad service or have had to fight with your insurer over a valid claim, you might want to switch carriers.
Once you’ve reviewed your policy to determine what it covers, you may find your coverage is lacking in some areas. If so, you can add additional coverages. If your current insurer doesn’t offer the coverages you want, you can switch carriers.
Common additional coverages you may need include:
- Flood insurance: A standard insurance policy doesn’t cover flooding. You can purchase flood insurance as a rider through a new insurer or from the National Flood Insurance Program.
- Earthquake insurance: Earthquakes typically aren’t covered under standard insurance either. You’ll need to purchase a separate policy.
- Water/sewer backup coverage: This coverage pays to repair water damage when water from a backed-up sewer or drain gets into your home.
- Umbrella liability: This coverage pays liability insurance beyond your policy’s limits. If you exhaust your liability coverage limits, you can use umbrella insurance to bridge the gap.
Potential downsides when changing home insurance
Although switching insurance providers is easy, it does come with some potential disadvantages, such as:
- Early cancellation fee: Some insurers charge a fee for an early cancellation of the policy. You can typically avoid this fee if you cancel the same day your insurance term ends.
- Losing a loyalty discount: You get a discount from some insurers once you’ve been with them for a certain amount of time. For example, after three to five years, you might get a 5% discount, and a 10% discount for six years or more. If you do have a loyalty discount, weigh it against the potential benefits of switching carriers.
- An inferior policy: Rates aren’t the only consideration when choosing an insurance carrier. When you switch, your new insurer might be a worse choice for you overall. For example, you might have better rates, but the new provider might deny your claims, or its coverage options may not be as robust.
- Coverage gap: If you cancel your old policy before your new one’s in effect, you’ll have a gap in coverage. If anything were to happen to your home during this period, you would have no insurance to protect your home.
- Rate increase: Some insurance carriers may offer a low rate to new customers and then raise that rate in subsequent years, leaving you no better off (or even worse) than before the switch.
Anna Baluch contributed to the reporting for this article.