Home > Home Insurance > Guide To Switching Home Insurance Companies

Guide To Switching Home Insurance Companies

Updated Jan 10, 2023

Updated Jan 10, 2023

Home > Home Insurance > Guide To Switching Home Insurance Companies

Nearly 70% of homeowners have a mortgage in the United States. If you’re a homeowner with a mortgage, almost any lender will require you to have a home insurance policy. However, you aren’t required to stick with the same home insurance provider year after year, allowing you to switch home insurance companies to save money or optimize your policy. Fortunately, switching homeowners insurance companies is pretty simple. 

How to Switch Homeowners Insurance Companies

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1. Decide Why You’re Switching Home Insurance Companies

Start by considering the options available and your primary reason for wanting to change insurers. 

Did you have a poor interaction with your current home insurance provider? Are you unhappy with your home insurance coverage? Or, you may be interested in shopping around for a less expensive home insurance policy

If you’re looking for a company with better service, read online reviews and ratings about how the insurer handles complaints and the claims process. If your reason for switching is price, double-check that the free quotes you received from other companies aren’t too good to be true. 

2. Determine How You Want to Shop Around for Insurance Policies

When shopping for home insurance policies, you have a few options for how to sign up for, gather home insurance quotes, and research new policies: 

  • Speak with an independent agent. Independent agents represent multiple insurance providers and can give you a handful of quotes at once. 
  • Direct market sales and online research. Direct market sales are completed over the internet, telephone, or mail, but they provide you with little additional information. 
  • Talk to an exclusive insurance agent. Exclusive agents only sell insurance products and services from one insurance carrier, so you’ll be limited to information about one company if this is the only venue you seek out information through. 

3. Compare Your Old Policy to New Policy Choices

Before switching insurers, double-check that you understand the fine print of your old and new policy options. Ensure you understand everything your old policy provided you and check if the new homeowners insurance policy offers the same, less, or greater coverage. 

Compare the following; 

  • Deductibles. Deductibles can save you money on the premium if you opt for a higher deductible. However, remember that you’ll need to be able to afford larger cash outlays if you make a case for an insurance claim. 
  • Double-check for exclusions and the amount of coverage. Every home insurance policy will have certain exclusions or hazards that are excluded in the policy terms and conditions. Read through the terms and conditions carefully to check what these are. Most home insurance companies automatically exclude earthquake coverage or flood insurance coverage. Still, they may offer additional coverage for these, which is an important decision you’ll need to make based on your location and risk factors. Other insurers may have exclusions based on certain dog breeds or pest control issues. 
  • Look at policy limits. Does the new policy you’re considering have lower or higher policy limits than your previous policy? Different property insurers determine dwelling coverage amounts in different ways, so verify that the coverage is adequate before enrolling in a policy. 
  • Check if the policies are replacement value or actual cash value. While it may cost more, replacement value can be worth it so that you can purchase new replacements for lost or damaged personal belongings instead of being reimbursed for the depreciated price of the item. We recommend looking into replacement value coverage if you have many new or pricey items. You’ll also want to consider extra coverage or higher policy limits if you have many high-value items, like artwork, jewelry, musical instruments, and electronics. 
  • Bundling options. Does this insurance carrier offer auto insurance? If so, it may offer a bundling option that gives you a discount if you have both your home insurance and car insurance through the same company. 

3. Look at Customer Reviews and Ratings

What do past and present customers say about different insurance companies and their home insurance rates? To make an informed decision, spend some time researching how the insurance provider handles complaints and claims

Remember that written reviews are not always the best indicator of how a company handles itself because many happy customers don’t write reviews, so you’re likely to see more negative ones. However, the Better Business Bureau and similar agencies conduct independent studies into what policyholders think about property insurers. 

A company’s AM Best score can also give insight into the insurance provider’s financial stability. AM Best is a credit-rating agency that grades businesses on economic strength. For example, a company with a high score will be more likely to be able to pay many claims at once after a massive natural disaster hits an area.

4. Check Your Current Homeowners Insurance Policy’s Effective Dates

The last thing you want to end up with is a lapse in your home insurance policy coverage. Mortgage lenders don’t look upon lapses fondly. Depending on your agreement with the lender, there may be repercussions, such as the mortgage lender purchasing coverage on your behalf that you still have to pay. Often, these premiums are much more expensive because the lender is not looking for the best rate for you but quick coverage to protect itself. 

You could also miss the opportunity for a continuous coverage discount with your new insurance provider if you end up with a lapse in your coverage. 

Please note that you can switch home insurance companies anytime, but if you paid your annual policy from your escrow account, it might be less stressful to wait to switch a month before your policy’s renewal date. You can cancel early and request a refund for the months that went unused for your policy, but getting that refund check in the mail can take some time. 

5. Purchase the New Policy

Once you’ve chosen the best policy, it’s time to set an effective date for your new policy. You mustn’t cancel your current coverage before your new policy’s effective date. 

For example, if your current policy expires on March 1, set your new policy’s effective date to March 1. Don’t set the new policy’s effective date to March 2 or later because you would experience a lapse in coverage. 

6. Inform Your Current Insurance Company

After you receive your homeowners insurance declarations page from the new company, contact your current one to inform it that you want to cancel your policy. Give it the specific date your new policy is effective, and tell it you want your current policy canceled that same day. Then, ask for a letter or email confirming the cancellation to give to your mortgage lender. 

Be prepared to request a policy cancellation in writing, either over email or through the mail. Some companies require this instead of over-the-phone cancellation. Include your policy number, contact information, home address, and purpose for reaching out (cancellation). 

If you opt to pay your home insurance company directly through your personal account, not an escrow account, ask about details for the refund for any prepaid parts of your current policy. If you’re currently set up for monthly automatic premium payments, ask when you can expect your last payment.  

7. Contact Your Mortgage Lender

Inform your mortgage lender immediately about any changes to your insurance policy. Once you receive the letter or email confirming the cancellation of your policy, send this to your lender and email a copy of your new home insurance declarations page as proof of your new policy.

Closing Thoughts

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Image Source: Canva

An active homeowners insurance policy is essential to meet your mortgage company’s requirements and protect yourself financially should the worst happen to your home. Take time to assess your coverage needs and the coverage limits you’re comfortable with in a policy. Don’t make this decision entirely on how low an insurance premium you can find. There are always less expensive policies, but this doesn’t account for quality. 

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