Sometimes, staying in a relationship with a homeowners insurance company can pay big dividends. If you insure your home with the same company for several years or more, you may receive a discount of up to 10 percent. But in other cases, it’s time to move on. You could have valid reasons for wanting to switch homeowners insurance companies when your policy is up for renewal or at some point mid-year.
If you own a home now – or plan to buy one soon – don’t assume you must remain wedded to your current insurer. Comparison shop, and you might find an even lower rate by switching insurance companies.
Why switch home insurance companies?
There are several reasons to break up with your homeowners insurance carrier. Shopping around is a great way to make sure you “get the best price, service and coverage,” says Lori Conarton, spokesperson for the Insurance Alliance of Michigan.
Four common factors that might cause you to shop around are:
- Price. You might find a better home insurance price, even when considering loyalty discounts or other price breaks your current insurer offers.
- Discounts. Another auto insurance company might offer big price break if you bundle your auto and home insurance.
- Service. Consider shopping around if you weren't satisfied with the service you received when making your last insurance claim with your current insurer.
- Coverage. Perhaps you want additional insurance -- such as sinkhole coverage -- or less restrictive coverage than you can get with your current carrier.
When to switch homeowners insurance companies
It makes sense to switch homeowners insurance companies any time you can lower your rate and improve your coverage. However, some life changes make it an especially good time to shop around – such as when you purchase a new home.
Start shopping for insurance as soon as a seller accepts your offer on a house, Conarton says.
"It is a big investment, and you want to protect it starting the day you walk through those doors as owners,” she says.
Start by getting a quote from your current insurer. That company might give you the best rate, especially if you have been a customer for many years and also have other types of coverage – such as auto insurance – with the insurer.
In other cases, another insurance company might offer you a better rate. Whichever insurer you choose, it is likely that your rate will differ from what you are paying on your current home.
With any luck, your rate might drop. For example, if your new home is located near a fire department, your cost to insure could dip.
On the other hand, if you are buying in a location prone to certain risks – such as purchasing in a flood zone, or in an area where hurricanes or earthquakes are prevalent – your cost to insure could increase. You might even have to buy extra coverage, such as flood insurance.
Costs also might rise if the new home has amenities that increase risk – such as a swimming pool.
Because the home and its location are new to you – and a bit unfamiliar -- working with an insurance agent can be especially helpful.
“Work with an insurance agent to ensure that you purchase enough insurance to cover the home and your belongings,” Conarton says.
Once you move into the new home, look for easy ways to drive your rate even lower. For example, installing a home security system, deadbolt locks and smoke detectors might help lower your bill.
How to switch homeowners insurance companies
If you decide to change your home insurance, follow these four steps:
1. Shop for a new carrier. Compare home insurance quotes and find a carrier that can offer you a better deal while meeting all your insurance needs. You can compare average rates by ZIP code for 75 coverage levels using Insurance.com's average home insurance rate tool. It will also show the highest and lowest rate fielded from up to six major carriers. Keep in mind that your home is likely your biggest and most valuable possession and you want to keep it and all your belongings protected.
You can shop online or speak directly to a licensed insurance agent at Insurance.com by calling 1-844-855-0163.
2. Apply for new insurance. You might be able to fill out an application with the new carrier online. Or, perhaps you can apply over the phone by talking with an agent. You will need to provide some basic information, such as the location and size of your home, and the year it was built.
Do you have any special items that you need to insure separately, such as jewelry or business equipment? Those items should be listed in your application. Before you commit to and purchase new coverage, make sure the policy you are applying for has all the features you want and deductibles you can manage.
3. Make the switch effective. Once you know you will be able to obtain new insurance and understand the date the new policy will be effective, cancel your existing homeowners insurance policy. To switch homeowners insurance companies, call your existing carrier when you're ready and say, "I would like to cancel my policy as of [date]."
Another way to cancel is to send in a written request. You should be able to email it to your home insurance carrier if you don't want to mail it. With a letter or email, you have a documented trail of your cancellation request. In the letter or message, include the following:
- Your name
- Your policy number
- The address of the home that is insured
- Your contact information
A basic statement that says, "I would like to cancel my policy." Include the date you want the cancellation to be effective.
Your address, so the insurance company has a place to send any refunded money. If you're uncomfortable calling or writing to your existing carrier to cancel, let your new carrier do it for you.
4. Notify your mortgage company. If you own your home outright, this step isn't necessary. But if you have a mortgage, your lender is likely to require you to pay your homeowners insurance (and real estate taxes).
For homeowners who have an escrow account set up with their lender, monthly mortgage payments likely include money that is used to pay your homeowners insurance premium. When the premium is due, your lender forwards the full amount to the insurance carrier you have chosen. So, if you change insurers, tell your mortgage company so it sends the check on your behalf to the correct company.
Some lenders allow you to tell them about the switch over the phone or by email. Others require that you put the information in writing. If a letter is necessary, ask for the address where you should send it. The information your mortgage lender needs to switch your homeowners insurance payments to your new company includes:
- The name and address of your current company
- The name and address of the new company
- Your mortgage loan number
- Your old and new homeowners policy numbers
Even if you directly pay your homeowners insurance bill, you still need to inform your mortgage company of the switch. If your mortgage insurance company isn't informed of your new coverage immediately, it may try to get its own coverage on your home. This is called forced insurance, and it’s expensive for you. So, keep your mortgage insurance company informed of any changes as soon as you make them.
One word of caution: Don't leave yourself without coverage -- even for one day. "You will need insurance in place when you get the keys," Conarton says.
Switch home insurance companies: manage payments
Your new company might want payment immediately. In fact, it might not start coverage until it receives a check. Keep the effective date in mind when telling your current carrier when to cancel your homeowners insurance policy.
Your mortgage lender might agree to send the check on your behalf, using money from your escrow account. Be sure to clarify with your lender what its payment practice is and whether it will send the check for you.
Ask about any refunds your current – and soon to be former – carrier might owe you. For example, an annual homeowners policy might cost $1,200. Every month, $100 of your mortgage payment goes toward your homeowners insurance premium. If your lender paid the full annual cost of $1,200 in January, then you switch insurance companies in June, you're due a $600 refund.
Your insurance company might send the money to your mortgage lender or to you. If you get the money directly, your lender may ask for it. Find out where to send the payment to keep your escrow account in good standing.
Switching homeowners insurance can pay off
Evaluate your insurance carrier annually, regardless of whether or not you want to switch insurance companies.
"You will need to update your insurance policy when you make improvements to the house," Conarton says.
The easiest time to shop for and change homeowners insurance policies is when your current policy term is coming to an end. However, you can shop anytime. And if you find a better deal, and you're satisfied the new company is trustworthy, go for it.
Discover more ways to save by reviewing tips on buying homeowners insurance.