There are several reason why you would want to change your home insurance. Maybe you’re frustrated with your agent or insurance company, bad claims experience, or the rate increased too high. If you find yourself considering a change in homeowners insurance, the good news is that isn’t as difficult as you may think.
The obvious first step is to locate and purchase a replacement policy. Then you can cancel your current policy. Make sure you cancel the old policy on, or maybe just one day after, your new policy starts. This prevents any lapses in coverage. If you have an escrow account, then you also need to inform your lender that you’re switching home insurers.
If you use an impound account with your mortgage company to pay your insurance premium, this is not a reason to avoid changing your homeowners insurance. If you have an escrow account, you simply need to give your lender notice that you plan to change your homeowners insurance, and provide them with the policy information.
Before you issue your new home insurance policy, you’ll want to make sure your mortgage companies information is properly listed on the policy. This is called the mortgage clause. It contains their proper name and loss payee and notice address. It’s important to get this correct, as it’s also how your lender receives the billing statement for payment.
If you switch home insurance policies without giving your lender a heads up, you need to send them the declarations page from your new policy, along with a written notice that your old policy is cancelled. If they get a notification that your prior policy was cancelled, but they don’t know you purchased a replacement policy, they could force place insurance.
You are free to change your homeowners insurance at any time. However, not all insurance companies refund your premiums on a pro-rata basis, and some may charge a cancellation fee. Therefore, if you plan to cancel your home insurance policy mid-term, you should consult your insurance agent or the company to confirm the if there are any cancellation fees, or “short-rate” applied to the cancelled policy.
A “short-rate” cancellation is typically a small amount of the refund premium that is withheld to account for the costs to issue or renew the policy. Under normal circumstances, the short-rate gets smaller after the mid-point of the policy term.
Not all insurance companies charge cancel fees or a short-rate cancellation. If your home insurance company does charge a cancel fee, or a short-rate cancellation, it’s typically easier to switch closer to your policy’s renewal date or at expiration.
Sure. Like previously stated, you are free to change your homeowners insurance any time. This includes after you file a claim. In fact, as long as your policy was in-force at the time of the loss, even if you cancel after you report the claim, your prior insurance company will continue to handle the claim. Your claim will remain with your old insurance company until it’s settled or denied.
Its important to note, however, that changing home insurance after a claim is not a way to avoid any premium charges that may be associated with the occurrence.
Even if you’ve suffered a claim, you can still get home insurance in most cases. If you’re concerned, you can compare home insurance rates online to see how your current claim may impact what you may pay.
If you cancel your homeowners insurance mid-term, you may receive a refund check. If you receive a refund check it’s because you’ve paid for more days of coverage than you received at the time of the cancellation. This is typical if you pay your premiums in one lump sum annually. But can occur anytime there is more premium paid on the policy than has been earned by the insurance policy term.
Example: Your annual premium is $1200 and you or your mortgage company pay the premium in full on January 1st. On May 30th you cancel your policy and change your homeowners insurance to a new company. As a result, the insurance policy would have only earned 6-months of the premium paid, and there would be 6-months of unearned premium remaining. Therefore, you would get a refund of $600.
It is easy to change your home owners insurance, and it can be done at any time. If you have an impound account with your mortgage lender, that doesn’t prevent you from changing home insurance, but it does give you a few additional responsibilities to make sure you new home insurance properly notifies your lender and sends the billing to the appropriate address. However, even that is easy.
If you have questions about changing your homeowners insurance, call your insurance agent. If you are looking for new options, please feel free to contact us at (877) 334-7646 or start a quote online.
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