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When and How to Switch Home Insurance Companies

Coverage is a necessary part of homeownership and if it’s linked with the escrow account, homeowners can lose track of the price they’re paying per year and the things covered under their policy. Reviewing a current policy and shopping around for better coverage and a better price are necessary parts of owning and maintaining homeowners coverage. 

The price for coverage and details of a homeowners insurance policy can change over time. Because home insurance is typically paid with the mortgage every month, homeowners can miss these changes even though insurers must notify policyholders of every adjustment. In addition, a homeowners needs for home insurance coverage may change over time, making their current policy outdated.

Consider the advantages, disadvantages, and steps when considering switching homeowners companies.

Reasons to Switch Home Insurance Companies

There are several reasons why an insured would need to switch insurance companies and several factors to examine while thinking about doing so. Shopping around at renewal time is an important step to make sure that an insured’s home needs are still being met. Things that should be considered while thinking about switching companies include:

Better Prices

Insurance companies are constantly evolving to have the best coverages available for their policyholders and unfortunately, those changes usually come with a price change. By shopping around at renewal times, an insured can compare their current policy to others on the market to make sure they’re getting the best coverage for their money.

Changing Needs

Reexamining a homeowner’s policy at renewal will not only keep an insured informed about their current policy but also extend an opportunity to consider their current home needs and allow them to adjust for their current life circumstances. As an example, a homeowner may begin investing in antiques or their children may all take up musical hobbies, increasing the value of the property inside the home. In this instance, the homeowner will need to increase their property coverage or consider scheduled property coverage for their particularly valuable belongings.

Better Customer Service

If you are dissatisfied with your current insurer’s customer service, you may want to change to an insurer that could potentially provide a better experience. Organizations like the Better Business Bureau typically can provide policyholder-driven reviews of insurers, allowing you to research other companies and their reputations amongst their customers.

Policy Bundles

Most companies now offer bundling opportunities to bring down the overall price for customers with several policies under the same company. If a home insurance company doesn’t provide a bundling option for home and auto policies, customers are missing opportunities for valuable discounts

Also, as companies are evolving, their discounts and bundle options are constantly changing as insurance companies shift around how much of a discount is granted for each item. Checking the policy and discounts at renewal ensures that your bundles are still as effective as they were when the policy was first purchased.

How to Switch Home Insurance Companies

If an insured checks their policy at renewal and sees that their price has gone up without explanation or that their policy doesn’t entirely cover what they need anymore, switching insurance companies might be the best move. Steps to change home insurance companies include: 

Shop and Compare Policies

Reach out to different insurance companies and ask them to pull quotes for a new policy. Make sure to have your current policy nearby to directly compare what the new company is offering, and use a notebook to keep track of the facts and figures. 

Compare your current deductible to the quoted one and check on policy limits to ensure those match up. Also, review for exclusions on the quoted policy and ask if the policy includes replacement value, which would give a customer enough to go to the store and purchase a new item, or actual cash value, which would pay what the item was worth at the time of the loss if anything is damaged and needs to be replaced.

Check Your Policy’s Effective Dates

Go over your declarations page to line up your new policy date to start on the same date the other coverage ends. If not timed appropriately, there may be a lapse in the policies. If your mortgage company hears about a lapse, they may buy coverage to take effect during the lapse, which can get expensive and is something that the homeowner would have to pay for out of pocket. 

Also, note that an insured can switch home insurance companies anytime. If a homeowners policy is paid through escrow, it might be easier to wait for the current policy to end before switching to a new one. Canceling a policy early and requesting a refund for the unused portion of the homeowner’s policy is always an option. Still, it might take time for the check to come, and the homeowner will have to pay into escrow out of pocket if the escrow account comes up short.

Buy New Policy

Once an insured has decided on a policy, set the start date for the new policy to be on the end date for the current policy to avoid a lapse. An insured can also have a new policy start sooner. If they decide to start a new policy before the old one has run its course, make sure to have the new policy’s start date and the old policy’s end date set for the same day. Once everything has been set in place, inform your new insurer of your mortgage company so that they may provide your lender with details about your new policy. Follow up with your lender yourself to ensure they have received notification of your change in home insurance.

Notify Your Existing Insurance Company

Once the insured has bound their new policy, they’re free to contact the current insurance company and let them know they’ll need to cancel the current policy. When reaching out to them, make sure to give them the same cancellation effective date as the start date for the new policy. 

The insurance company will inform a policyholder of what they’ll need to complete the cancellation: some companies will allow them over the phone, while others will require the request to be in writing. Either way, give them what they need to complete the cancellation and keep a copy of the cancellation date and time with the other home documents.

Contact Your Mortgage Lender

Mortgage lenders require that homeowners keep coverage on the home for the duration of the loan, so make sure to contact them and inform them about the new policy. Some mortgage companies will require that they be listed on the policy itself and if so, let the insurance representative know so they can add them. The lender will require an updated copy of the new declarations page, so get that to them as soon as possible. 

Disadvantages of Switching Home Insurance Companies

The disadvantages of switching home insurance companies can include:

  • Losing bundling discounts on home coverage, auto coverage, and other services: Moving one service to another provider but leaving the others with the original company can wind up costing an insured money if not done correctly. One way to avoid this is to be prepared to switch all of the insurance services to a new company simultaneously. 
  • Losing loyalty discounts: some insurance companies give additional discounts for staying longer with the current company. Moving some or all of your services could cost you this discount.

When Should I Switch Home Insurance Companies?

Read over the current policy at renewal and consider switching if significant lifestyle coverages, like no pet coverage and actual cash value instead of replacement value, are missing from the current policy. In general, it’s a good idea to shop and compare rates for homeowners coverage once every few years. If an insured is shopping for a new home or has recently purchased one, more frequently might be better to get an idea of the rates, coverage types, and new deals in the area.