Switch Home Insurance Companies: 5 Steps to Save
Getting Started: Your Guide to Switching Home Insurance
Deciding to switch home insurance companies is a smart move if you’re looking for better rates, improved coverage, or superior customer service. Many homeowners switch due to high premiums, poor service, or life changes that make their current policy a poor fit. Exploring your options can often lead to significant savings without sacrificing protection.
If you’re wondering how to switch home insurance companies, here are the 5 key steps to guide you:
- Review Your Current Policy: Understand your existing coverage, limits, and deductible.
- Compare New Quotes: Shop around from multiple providers, comparing similar coverage options.
- Purchase Your New Policy: Ensure your new policy is active before canceling your old one to avoid any gaps.
- Cancel Your Old Policy: Notify your previous insurer to formally end your coverage.
- Notify Your Mortgage Lender: Inform your lender about the change, especially if you have an escrow account.
This guide will walk you through each step, helping you understand the best times to switch, what to watch out for, and how to ensure you’re getting the right coverage for your home.
As Michael J. Alvarez, CPRM, CPIA, I use my expertise in the Florida & New Jersey insurance markets to help homeowners successfully switch home insurance companies. My background as an insurance entrepreneur allows me to build custom coverage plans that truly benefit you.
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Why and When to Switch Your Home Insurance
Your insurance needs change over time, and the policy that worked three years ago might not be serving you well today. Switching home insurance companies every few years has become a common strategy for savvy homeowners. You can often save money on home insurance without sacrificing coverage, and if potential savings exceed 10%, a switch usually makes financial sense.
From May 2022 to May 2023, 94% of homeowners saw their quoted annual premium increase. If you’re in that majority, it’s wise to consider your options.
Top Reasons to Consider a Change
Several factors can drive homeowners to switch home insurance companies:
- Premium Increases: A significant, unexplained premium increase is a primary motivator. While costs are rising industry-wide, you don’t have to accept the first renewal offer you receive.
- Poor Customer Service: Frustrating customer service, especially during the claims process, is a major red flag. Your insurer should be a helpful partner, not an adversary.
- Life Changes & Renovations: Buying a new home or completing major renovations increases your home’s value and changes your coverage needs, making it a perfect time to shop for a new policy.
- New Risks: Adding a pool, a certain dog breed, or acquiring valuables like art or jewelry introduces new risks that may require different coverage or a new insurer altogether.
- Better Coverage Options: Another provider might offer more comprehensive protection or specific endorsements your current insurer lacks. Explore more about home insurance coverage options to see what’s available.
- Bundling Opportunities: Combining home and auto policies with a new company could save you 15-23% on both.
The Best Time to Make the Switch
While you can switch home insurance companies anytime, some moments are more opportune than others for a smooth transition.
- At Policy Renewal: This is often the ideal time. Your policy is ending naturally, so there are no cancellation fees. Your renewal notice, typically sent 30 days in advance, gives you ample time to shop around.
- When Buying a New Property: A new home means a different risk profile. This is a natural opportunity to find coverage custom-fit to your new situation.
- After Significant Life Events: Major renovations, family changes, or an improved credit score can affect your rates and coverage needs, making it a good time to reevaluate.
- When Savings Exceed 10%: If you find significant savings, it often makes sense to switch mid-policy, even with a small cancellation fee. The long-term savings can easily outweigh the one-time cost.
The 5-Step Process to Switch Home Insurance Companies
Switching home insurance companies is a straightforward process when you follow a clear plan. Being organized is key to finding better coverage or saving money without creating dangerous gaps in protection. Here’s a step-by-step guide.
Step 1: Review Your Current Policy and Gather Information
Before shopping for a new policy, understand your current one. Your declarations page is a one-page summary of your coverage. Note your dwelling coverage (cost to rebuild), personal property limits, liability coverage, and deductibles. Also, be aware of your claims history, as new insurers will review it. Gather key property details like your home’s age, square footage, roof type, and any recent upgrades like a new security system, as these can affect your rates.
Step 2: Compare Quotes and Companies
Now, it’s time to shop around. Getting quotes from multiple companies is essential, but ensure you’re making an “apples-to-apples” comparison with similar coverage levels. A much cheaper quote might have lower dwelling coverage or liability limits. Also, consider how a higher deductible can lower your premium.
Look beyond price. Check customer satisfaction ratings from sources like J.D. Power’s customer satisfaction and financial strength ratings from AM Best to ensure the company is reliable and can pay claims. NUsure simplifies this by letting you compare options from 50+ top-rated carriers in one place. Our Home Insurance Price Comparison tool does the legwork for you.
Step 3: Purchase Your New Policy
Once you’ve chosen a policy, it’s time to make it official. The most important rule is: Never cancel your old policy before your new one is active and confirmed. A gap in coverage, even for a day, can be financially devastating and may lead to higher future premiums. Set the effective date of your new policy to align with the cancellation of your old one. You’ll likely need to pay the first premium to activate coverage. Once paid, review your new policy documents to confirm all details are correct.
Step 4: Cancel Your Old Policy
With your new policy active, you can cancel the old one. Send a written cancellation notice (an email is fine) to have a paper trail. Request written confirmation of the cancellation to prevent billing errors. If you paid your premium in advance, you should receive a refund for the unused portion. Be aware that some insurers use pro-rata cancellation (a full refund of the unused premium) while others use short-rate cancellation (which includes a small penalty fee).
Step 5: Inform Your Mortgage Lender
If you have a mortgage, you must inform your lender of the switch. They require proof of continuous insurance to protect their investment. This is especially critical if you have an escrow account, where your lender pays the insurance premium on your behalf. Provide your lender with your new declarations page and ensure the new policy includes a mortgagee clause listing them. Follow up to confirm they have updated their records and will redirect payments to your new insurer.
Understanding the Financials: Fees, Refunds, and Discounts
Understanding the financial side of switching home insurance companies helps you avoid surprises and make decisions that benefit your budget.
Potential Penalties for Canceling Mid-Term
While you can cancel your policy anytime, canceling before your renewal date (mid-term) may involve a fee.
- Short-rate cancellation: The insurer keeps a small portion of your unused premium as a penalty to cover their administrative costs. For example, a penalty might be 10% of the remaining premium.
- Pro-rata cancellation: The insurer refunds the full unused portion of your premium without any penalty. This is common if you cancel at renewal or within a “free look” period.
Some companies also charge flat administrative fees. Always ask your current provider about their cancellation policy before you switch.
| Feature | Pro-Rata Cancellation | Short-Rate Cancellation |
|---|---|---|
| Refund Amount | Full refund of unused premium | Refund of unused premium, minus a penalty or fee |
| Penalty | No penalty | Penalty applied (flat fee or percentage of premium) |
| Reason | Often when insurer cancels or within “free look” | Common for policyholder-initiated mid-term cancellation |
| Example | Pay $1200/year, cancel after 6 months, get $600 back | Pay $1200/year, cancel after 6 months, get $500 back (with $100 penalty) |
How to Handle Your Premium Refund
How you receive your refund depends on how you pay.
- Paid via Escrow: If your mortgage lender pays your insurance from an escrow account, any refund from your old insurer will go back to the lender to be deposited into your escrow account.
- Paid Directly: If you pay your insurer directly, the refund check will come straight to you.
Refunds are typically processed within a few weeks after your cancellation is finalized.
The Impact on Discounts and Bundles
Switching insurers might mean giving up certain benefits, so factor them into your calculations.
- Loyalty and Claims-Free Discounts: You may lose discounts earned for being a long-term customer or for not filing claims. These benefits don’t transfer and can take years to earn with a new provider.
- Bundling: Bundling home and auto insurance can save 17-23%. When getting quotes, compare prices for both bundled and individual policies. Sometimes, a new bundled deal is better than your current one, but occasionally, splitting policies between two different companies can be the cheapest option. Do the math to see which approach offers the best total savings.
Navigating Potential Risks and Complications
Switching home insurance is usually smooth, but it’s wise to be aware of potential complications to ensure a seamless transition.
Can I switch home insurance companies with an open claim?
Yes, you can switch home insurance companies with an open claim. The insurer that covered you when the incident occurred remains responsible for handling that specific claim until it’s resolved. Your new insurer will be aware of your claims history via a CLUE (Comprehensive Loss Underwriting Exchange) report, and an at-fault claim may affect your new premium, but it won’t prevent you from switching.
The Dangers of a Coverage Lapse
A lapse in home insurance coverage is a major risk that must be avoided. If a fire or other disaster occurs during a gap, you are personally responsible for all costs. Furthermore, your mortgage lender requires continuous coverage. If your policy lapses, they can purchase expensive “lender-placed insurance” and add the cost to your mortgage payment. A coverage gap is also a red flag to insurers, which can lead to higher premiums in the future. For more information, see this Consumer advisory on insurance lapses.
How to Ensure You Have the Best Home Insurance Coverage
When you switch home insurance companies, don’t just grab the cheapest rate. The goal is to find the right balance between affordability and comprehensive protection. Reassess your coverage needs:
- Dwelling Coverage: Ensure it covers today’s full rebuilding cost.
- Personal Property: Check that you have enough coverage for your belongings.
- Liability: Confirm your liability limit is sufficient for your risks (e.g., a pool or trampoline).
- Additional Living Expenses (ALE): This covers costs if you’re displaced from your home during repairs.
Always aim for Replacement Cost coverage over Actual Cash Value, as it doesn’t deduct for depreciation. Also, consider Endorsements and Riders for extra protection against things like sewer backup or for high-value items. Be aware of common exclusions like flood or earthquake damage, which require separate policies. We can help you Find the Best Home Insurance Coverage for your specific needs.
Frequently Asked Questions about Switching Home Insurance
It’s natural to have questions about changing your home insurance. Here are answers to some of the most common ones.
Can I switch my home insurance policy at any time?
Yes, you can switch home insurance companies whenever you want, not just at renewal. To ensure a smooth process, align your new policy’s start date with your old one’s cancellation date. This helps avoid coverage gaps and potential cancellation fees, though the savings from a new policy often outweigh any small fee.
How does switching home insurance companies affect my current coverage?
Your old coverage ends on the cancellation date you set, and your new policy’s terms, limits, and deductibles take effect. It’s crucial to compare the “declarations pages” of both policies to ensure you aren’t losing important protections. This is also a great opportunity to customize your coverage to better fit your current needs.
What happens if I don’t tell my mortgage lender I switched?
Not informing your mortgage lender can cause serious problems, especially if you have an escrow account. Your lender might continue paying your old insurer, causing your new policy to be canceled for non-payment. They could also purchase expensive “lender-placed” insurance and charge you for it. To avoid this, notify your lender immediately and provide a copy of your new policy’s declarations page so they can redirect payments correctly.
Find a Better Policy and Switch with Confidence
Deciding to switch home insurance companies is a proactive move toward a more secure financial future. To make the transition a success, remember these golden rules:
- Shop Smart: Get multiple quotes and compare coverage details, not just prices. A cheap policy isn’t a bargain if it leaves you underinsured.
- Time Your Switch: Aligning with your renewal date is ideal to avoid fees, but you can switch anytime if the savings are significant.
- Avoid Coverage Lapses: This is non-negotiable. Ensure your new policy is active before you cancel your old one to avoid major financial risk.
- Communicate with Your Lender: Inform them of the change immediately to ensure a smooth transition of payments, especially with an escrow account.
- Prioritize Protection: The best policy balances cost with comprehensive coverage for your home, belongings, and liability needs.
At NUsure, we believe managing home insurance should be simple. Our insurance marketplace lets you get free quotes from over 50 top-rated carriers, helping you find and purchase personalized policies online while saving time and money.
Our unique service also includes year-round policy monitoring, ensuring your coverage always fits your needs without constant check-ins. We empower you to take control of your insurance costs and get the protection you deserve with confidence.
Ready for a seamless transition to a better policy? Get Instant Insurance Coverage with us today.