How to switch home insurance companies
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There are many reasons to potentially switch insurance carriers when assessing your homeowners insurance policy. Perhaps another carrier offers an endorsement that your current carrier doesn’t offer. Or maybe you’ve seen that you can get similar coverage for a better price from a different company. Whatever your reason for switching home insurance companies, there are some key things to know before making the change.
Can you change home insurance at any time?
Yes, you can change home insurance at any time — but you may want to take a moment to consider the implications of doing so. First, depending on your carrier and policy, you may be charged a cancelation fee for terminating coverage before the end of the policy term. Second, a lapse in coverage may increase your insurance rates and leave you without financial protection for your home, so you’ll likely want to ensure you have a new policy in place before the old one ends.
If you’re considering making the switch because you found a cheaper home insurance policy, you may want to speak to your current provider before finalizing any changes. While you can switch homeowners insurance at any time, it may be more cost-effective to wait until the policy renewal date before changing companies.
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What information do you need to gather before comparing homeowners insurance quotes?
When getting a quote for home insurance, it’s important to have the following information on hand:
- Your personal details: Name, property address, birth date and the date you want the coverage to start.
- Home details: The number of full-time residents and whether it’s your main residence. If it’s a secondary or seasonal home, the number of weeks it’s occupied per year. You might also want to create a home inventory.
- Security features: Details about deadbolt locks, fire extinguishers, sprinkler systems, and any fire or burglary alarm systems you have installed.
- Building details: The year your home was built, total finished square footage, number of floors, any solid fuel appliances and any separate buildings on your property. You also need to disclose unique features of the property, such as an in-ground swimming pool or tennis court.
- Insurance history: Any claims you’ve made in the last five years, your most recent property insurance provider and the dates of your last coverage period.
- Fire protection information: How close fire services are to your home, whether your home is outside city boundaries and the distance to the nearest fire service.
- Additional coverage needs: Any specific items like home computers or jewelry that may require higher coverage limits.
How often should you change homeowners insurance companies?
It’s recommended to review and reassess your homeowners insurance policy every one to two years, especially if there’s been an increase in your premium or any changes in your policy or personal circumstances that could affect your rates. Regularly doing this can help ensure you’re receiving the best value and coverage for your home.
How to change home insurance companies
While it may seem daunting, changing your home insurance company is actually pretty straightforward. To do so, you could follow these seven steps:
1. Decide whether switching home insurance is the right choice
There are a number of reasons you might want to know how to switch home insurance. You may decide to switch to bundle your auto and home policies with one insurer, expand your home insurance coverage with another carrier’s endorsements or find a carrier with more robust digital tools.
Another common reason to switch may be cost-related. A quote from a different provider for the same level of coverage could be significantly lower. However, most insurance professionals recommend carefully comparing quotes before you switch carriers. Another carrier’s lower quote may be due to lower coverage limits or reduced coverage types. Before you switch homeowners insurance companies, you might want to review your situation with a licensed insurance agent to ensure you’re still getting the coverage you need.
2. Compare ratings
Third-party ratings may help you decide if a company will meet your needs. For example, you could look at customer satisfaction ratings from J.D. Power and the Complaint Index from the National Association of Insurance Commissioners (NAIC) to decide if a company’s level of service is equal to what you are looking for.
Financial strength ratings may be helpful metrics to consider as well. Companies like AM Best and Standard & Poor’s (S&P) assess the historical financial strength of insurance companies and assign each company a proprietary rating. These ratings might help you get a sense of a company’s historical ability to pay out claims, especially after a catastrophic large loss event like a hurricane, tornado or wildfire.
3. Compare your current policy to the new policy
Home insurance policies are specific, detailed and nuanced. Before canceling your policy and signing up for a new one, it’s wise to read both policies side-by-side to see how they differ. In some cases, you may find that your new prospective plan adds new coverage types or endorsements while still having everything your previous one had. More commonly, though, you’ll discover trade-offs between the two policies. Below are some tips for what to look for when comparing two homeowners policies:
- Check the policy limits: You may want to make sure you are aware of how the coverage limits change, especially since property insurers have their own way of calculating your dwelling coverage amount. This calculation will appear on your policy as your Coverage A amount and impact several other coverage limits on your policy. It’s important to ensure your coverage limits reflect current replacement cost value. According to an analysis by the Insurance Information Institute, cumulative replacement costs for homes have increased 55 percent since 2020 due to escalating costs of construction materials and labor.
- Look for exclusions: The terms and conditions may reveal exclusions or hazards not covered in the new policy. Most home insurers exclude flood and earthquake coverage in a standard homeowners insurance policy, but some insurers may have additional exclusions, such as exclusions for certain dog breeds.
- Check your endorsements: Endorsements are add-ons that increase or broaden your coverage. Not all companies offer the same endorsements, so you may want to be aware of how these riders differ between your quotes so you know if you’re losing or gaining coverage.
- Compare deductibles: The deductible is the amount of money you agree to pay if you file a claim; it’s essentially the portion of a loss that you are willing to assume. You could save money if your deductible is higher, but most insurance professionals recommend choosing a deductible you can afford to pay with little notice. It’s also worth noting that hurricane-prone states have a separate deductible for windstorm damage for named storms. In addition, tornado alley states have a separate wind/hail deductible.
- Review your coverage type: There are several different types of home insurance policies, and each type differs in how your coverage is handled. Getting a quote for the same type of coverage may help you more accurately compare rates. For example, if you are comparing replacement cost coverage to actual cash value coverage, you may notice a price difference, but it’s really because the coverage type is different.
Remember that the best home insurance company for one person isn’t necessarily the best company for everyone. Needs vary, and working with a licensed agent might help you find the right fit for your situation.
4. Look at your current policy’s effective dates
It may be important to review your current policy’s homeowners insurance declarations page to find out when your coverage ends. If you cancel your old policy before coverage begins on the new one, you could end up with a lapse in coverage. Lapses can result in higher premiums. Even worse, if you suffer a loss while your coverage has lapsed, you will have to pay 100 percent out of pocket (and if you try to file a claim retroactively, it is considered insurance fraud). In addition, a mortgage company could purchase coverage on your behalf — called force-placed insurance — and pass the premium on to you in your monthly mortgage payment.
5. Buy the new policy
Once you know the newer quote works for you, it may be time to buy the new home insurance policy. You will be asked for an effective date for your new policy. You can set up your new policy to go into effect the same day as your current policy ends. However, most insurance professionals advise against canceling your current coverage before your new policy’s effective date. For example, if your current policy ends on June 30, you could set your new policy’s effective date to June 30. This prevents you from paying for duplicate coverage and from experiencing a lapse in coverage.
6. Notify your existing home insurance company
Once you have started or scheduled your new policy, it is likely time to contact your existing home insurer or agent and cancel your current policy. You’ll need to provide the cancelation date and you might need to sign a form to authorize the cancelation.
If you cancel your policy on its renewal date, you likely won’t have a refund since all the premium was used up. If you cancel mid-term, though, you might get money back depending on how you pay.
7. Contact your lender
If you have a mortgage, you will likely need to keep your lender in the loop. If you pay for your homeowners insurance directly, you could call your lender to notify them that you have switched insurance companies. You may need to email your mortgage company a copy of your new homeowners insurance declarations page.
How to change homeowners insurance policies with an escrow account
If you have a mortgage with an escrow account, the process looks a little different. Below, we’ve highlighted the steps involved for how to change homeowners insurance when you have an escrow account:
- Start by shopping for a new policy. Understand your coverage needs and the features you’re looking for.
- Verify the mortgagee clause for your lender. Your new policy should have the correct information; some companies have a specific mailing address for insurance-related documents.
- Purchase your new policy, ensuring the mortgagee clause is correct.
- Cancel your old policy. Make sure the cancelation date aligns with the effective date of your new policy to avoid a lapse in coverage.
- Inform your mortgage lender about the change, providing all necessary details about your new policy. The lender should receive a cancelation notice from your prior insurer and a declaration page from the new insurer, but letting your mortgage company know directly about the change might help forestall any complications.
- If you receive a refund on your premium, redirect it to your new escrow account to avoid any escrow shortage that could increase your mortgage payments. If you do not repay your escrow, your mortgage lender may not have sufficient funds to pay the new policy, which could result in an increase in your monthly mortgage payment to rebuild the escrow account.
Keeping both your mortgage company and insurance providers well-informed ensures a smooth transition.
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