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By Cynthia Paez Bowman, Bankrate
One of the best ways to make sure you're getting the best deal on homeowners insurance is to periodically comparison shop and check if you can get a better price with a different insurer. If you do find a better deal then you might be ready to ask: "Can I switch home insurance?"
The good news is that yes you can. Switching home insurance is perfectly
legal. But if your mortgage lender requires you to have a homeowners
insurance policy (which is almost always the case) you'll want to make
sure you're following the right steps. Read on to learn how to change
homeowners insurance seamlessly to save money.
How to switch home insurance
Switching home insurance is a fairly simple process. To do so, follow these five steps explaining how to switch home insurance:
1. Decide whether switching home insurance is the right choice
Before
you switch homeowners insurance, it's crucial to do your research so
you can be confident you're making the right choice. Read the fine print
on the policies and make sure you're comparing apples to apples. Are
the policy limits on the new policy the same as or greater than your
current policy? Are there any exclusions or hazards not covered in the
cheaper policy? Are the deductibles the same? You want to make sure
there are no surprises down the road.
You may find that the cheaper quote means less coverage or that your losses would be reimbursed as actual cash value
instead of replacement cost coverage. Cash value pays for the
depreciated value of your items, whereas replacement cost covers the
cost to replace at current market prices. Consider whether saving a
couple of hundred dollars per year is worth switching to a cash value
policy.
2. Compare ratings
If the quote passes the test,
do a little research on the new insurance company and how customers feel
about it. You'll want to look at how the insurer responds to and pays
out claims. Take written reviews with a grain of salt - many customers
don't review a company for doing a good job and only speak up after a
problem. Some good sources for customer ratings include the Better Business Bureau, as well as J.D. Power's Customer Satisfaction Survey and Property Claims Satisfaction Study.
3. Look at your current policy's effective dates
Look
at your current policy's homeowners insurance declarations page to find
out when your coverage ends. You could switch at any time, but if you
prepaid your policy for a certain period of time then it may be less of a
hassle to wait on switching your home insurance until the policy ends.
If you can't wait, you can always cancel early and request a refund of
the unused portion, but it may take a while to get that refund check.
4. Buy the new policy
Once
you know the newer quote works for you and have an idea of when your
current homeowners policy ends, it's time to take action. Go ahead and
apply for the new policy and pay to endorse it before canceling your
current policy. A new homeowners insurance policy typically takes one to
three business days to take effect so you want to purchase the new one
before canceling the old one in order to avoid a lapse in coverage.
You'll
be asked for an effective date on your policy. If you've decided to let
your other current homeowners insurance lapse, enter an effective date
to pick up where it left off. For example, if your current policy ends
on June 30, you could set your new policy's effective date to June 30.
If you've decided to switch sooner, enter the date you'd like your new
policy to take effect. Make note of the date - you'll need to notify
your current insurer.
5. Notify your existing home insurance company
Once
you have a homeowners insurance declarations page and receipt of
payment from the new insurer it's time to contact your existing home
insurer and let them know you'd like to cancel the policy.
You'll
need to call your current insurance company and say something along the
lines of "I'd like to cancel my homeowners insurance policy as of" and
give them a date. If your new policy is effective as of May 15, you can
say you'd like your policy canceled as of May 15. You may receive some
push back or a warning that your coverage will lapse. You can explain
you already have a new policy effective as of that date. If the insurer
accepts your cancellation over the phone, ask for a letter or email
confirming the cancellation. You'll need it to notify your mortgage
lender.
If you pay your home insurance directly and not through an
escrow account, ask for details on any refund due to you on prepaid
portions of the policy. If they automatically draft your premiums each
month, ask about when the last draft will go through and how they will
refund you the unused amount.
Some insurers may require you to
cancel in writing. Be sure to note the email address or mailing address
and what information you'll need to include. Draft a letter or email
with your name, policy number, home address and contact information.
State that you'd like to cancel your homeowners insurance policy
effective on [date]. Save the sent email for your records or mail the
letter with delivery tracking.
6. Contact the lender
If
you have a mortgage, you'll need to keep your lender in the loop. One of
the conditions of your mortgage is to keep your home insurance policy
up to date. If you pay for your homeowners insurance directly, call your
lender to notify them you've switched insurance companies. You'll need
to email them a copy of your new homeowners insurance declarations page,
payment receipt and copy of your original policy's cancellation notice.
If
you have an escrow account with your lender and they pay for your
homeowners insurance from the account, it's important to notify them
right away so the lender directs payments to the new insurance company.
Frequently asked questions
Can I switch home insurance?
You
can switch home insurance at any time, but there are important steps to
follow. Purchase the new insurance first, then cancel your existing
policy. Don't forget to notify your mortgage lender of the change.
What is the homeowners insurance declaration page?
The
homeowners insurance declaration page is your proof of insurance. It
includes important information about your home insurance policy, such as
the beginning and ending date of the policy, coverages, name and
address of the insured location.
What do I need when changing homeowners insurance?
You'll
need proof of your new policy in the form of a homeowners insurance
declaration page and the cancellation of home insurance from your
original insurance company.
How do I know if switching home insurance is a good idea?
If
you find home insurance for a lower price, you'll need to evaluate
whether it's worth switching. Compare deductibles, what hazards are
covered, the policy limit amounts and whether the new policy is
replacement or cash value. If the new policy provides the same account
of coverage or better, changing homeowners insurance is a wise financial
decision. If the cheaper policy means you need to give up some
features, you'll need to decide if the savings are worth it.
See more at Bankrate
