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Can you cancel your home insurance any time?

Fact-checked with HomeInsurance.com

Buying a home is one of the biggest investments you’ll ever make and comes with several ongoing costs, one of which is homeowners insurance. Home insurance is not only a precaution against significant financial loss, but is also usually required by your mortgage lender. However, there are certain situations when it makes sense to cancel your home insurance and switch providers.

The most common reason to cancel your insurance policy is a rate hike or dissatisfaction with your current premium. There are a number of factors that determine your premium, but sometimes insurance companies increase rates for no reason at all. Switching providers can be a good way to save money.

Ultimately, you can cancel your home insurance policy at any time; however, there are some things you should be aware of before you start the transition process.

Penalties to consider before canceling your insurance

Although you are technically free to cancel your home insurance whenever you want, you may incur fees or penalties. Many insurance companies charge a penalty for terminating your policy prior to the end of the term. The fees range pretty significantly between insurance companies, so be sure to verify with your provider what its specific fees are and how you may be able to avoid them. 

You could also potentially end up owing money to your insurance company after you cancel. Most insurance providers finance home insurance policies for a certain length of time. If you keep your policy for the entire duration of the policy period, your monthly payments cover the cost. But if you cancel half way through, you might have to pay the difference.

Compare Costs and Savings

If you’re considering cancelling your insurance policy, the first thing you should do is shop around and get quotes from a few different providers. If the quotes are similar to what you’re currently paying, there’s a chance you could discuss matching the price with your current provider. If you’re getting quotes that are within 10% of your existing policy, it might be worth negotiating instead of switching entirely.

If you try to negotiate a lower rate and you get denied, closely weigh the cost benefits of switching providers before you take any official steps to cancel. Between penalties, fines, and money owed, you might not actually save any money by switching carriers. In fact, it could cost you more money out-of-pocket, depending on your current rate.

Impact to Discounts

Another thing to keep in mind is that switching providers might have an impact on the rate of your other policies. If you have multiple policies with the same insurance provider, you probably get a discount on your premiums. For example, if your home and auto insurance is under the same provider, cancelling your home insurance could cause your auto policy rate to increase.  

While it’s a good idea to review your home insurance policy from time to time, it’s important to do some research and determine the true cost of switching and the actual value of savings before making any final decisions. If you have questions about your home insurance policy, contact an agent. 

How to cancel your homeowners insurance

The actual process of cancelling your home insurance is pretty straightforward, but keep in mind that insurance companies do not allow cancellation of any policy within 60 days of purchase. To be approved for a cancellation, you are required to have a policy for at least that amount of time.

To start the cancellation process, contact your agent or a representative from your insurance company and let them know of your intent to cancel. Next, you’ll write a letter to the insurance company letting them know you want to terminate the policy.

In the letter, include your name, policy number, the insured home address and proposed cancellation date. If you paid your premium in full for the year, you can also request that the provider reimburse you for the difference.

The last step is to send the letter to your provider. If you can, fax and mail a hard copy to your agent’s office, and make sure to confirm receipt. Keep a copy on hand for your own records.

How to switch your home insurance

To switch home insurance providers, there are some steps you need to follow.

Compare providers

The first thing you should do is shop around for a new provider. Finding a lower rate is important, but make sure you’re looking at providers that offer the amount of coverage you need. For instance, if you have valuables or expensive personal belongings, you’ll want a company that offers endorsements or high coverage limits to protect your more valuable possessions.

Apply for the policy

Once you’ve found a suitable carrier, apply for a new home insurance policy. Some insurance companies allow you to complete this process online, whereas others require you to call or visit an agent in-person. Before you sign the policy and agree to the terms, review your coverage limits, deductible and endorsements, and apply any discounts that could lower your rate.

Overlap coverage

When you sign the new policy documents, you’ll set the policy start and end date. Make sure the start date overlaps a few days with your old policy to avoid a lapse in coverage, which could result in penalties or fines. Only after you have a new policy should you contact your old insurance provider and let them know that you want to cancel. Your new provider might be able to call and cancel the policy for you.

Notify Lender

If you have a mortgage on your home, the last step is to notify your lender that you switched insurance providers. If you have an escrow account with your lender, your monthly mortgage payments may include money that covers the cost of your home insurance. When it’s time to pay your monthly premium, your lender takes the money out of your escrow account and sends it to the provider.

When you switch providers, the mortgage company needs to know where to send the monthly insurance payments. If you don’t notify them and they keep sending the payment to the old insurance company, it could compromise the standing of your escrow account.

The takeaway

  • You can cancel your home insurance at any time, but it might incur fees or penalties.
  • Between penalties, extra fees and owed money, it could be more costly to switch providers.
  • Before cancelling your policy, weigh the costs and benefits; make sure to notify your mortgage company if you do switch.

Potential savings or improved coverage are great reasons to cancel your home insurance policy and switch providers. But it’s important to be careful about evaluating all costs and benefits. These can include cancellation penalties or remaining balances you would owe. If you do switch providers, ensure your new and old policies overlap by a few days, and notify your mortgage lender to keep your escrow account in good standing.

Elizabeth Rivelli

Elizabeth is an insurance writer for coverage.com, where she covers insurance providers and reviews policies to help consumers find comprehensive and affordable coverage for every area of their life. She has more than three years of writing experience for top online insurance and finance publications.

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