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How to switch home insurance

Whether you own a home or you're moving to a new house, you may be considering switching your home insurance company. That can seem like a daunting process -- determining when to change, if you should switch and how to do it.

In some cases, sticking with your current home insurance can be beneficial. You're perhaps a longtime customer and have wracked up some discounts. But other times, you may feel you're ready to give your current company the heave-ho in search of a better or more economical option.

Why would you want to change home insurers?

Breaking up is never easy. Several reasons that may prompt you to ditch your current insurance company. Common factors that might inspire you to look around are:

  • Price
  • New home
  • Better discounts
  • Better service 
  • Coverage

"There are myriad reasons [to change your homeowners insurance]," said Loretta Worters, vice president of media relations at Insurance Information Institute. "Could be price, coverage changes, if you've moved to an area where the company doesn't write coverage."

Many factors go into determining your homeowners insurance rate. Location is the biggest. 

If you're in an area prone to storms, tornadoes, hurricanes and earthquakes, your rate will be higher. Florida and Louisiana have the highest average rates. Florida is more than $2,350 over the national average for home insurance. The least? Hawaii and Vermont.

"Home insurance rates will vary greatly depending on your state, and historical claim loses," said John Espenschied, owner, Insurance Brokers Group. "Even in large states, such as California, home insurance premiums can vary depending on if you are near a large national forest in northern California or down south in Orange County with a considerably less chance of forest fires. 

“Some states, such as Florida, are very difficult to find affordable premiums due to the annual hurricanes, which can happen anywhere in the state. Then, you have states, such as Arizona, with not much of a chance of hurricanes or tornadoes, hail, earthquakes or forest fires, so you'll find the premium a fraction of what you might find in Texas, Oklahoma or any state in Tornado Alley,” he added. 

In this guide, we'll discuss why you may want to switch home insurers and how to go about doing that. 

How to switch home insurance companies

Shopping around is always the best way to find your best deal. But when you're ready to go, make sure you know all the steps to take to actually make the switcheroo.

Here's what to do:

1. Go carrier shopping. Compare, compare, compare again. Collect homeowners insurance quotes until you find a better deal that meets your requirements. 

2. Apply for your new insurance. Most carriers have online tools to see how much coverage would cost. Another method is to pick up the phone and talk to an agent. You'll need to provide basic information that applies to coverage, such as your location, the size of your home and the year it was built. Other special items may need to be insured separately and you should list these on your form. These include jewelry, business equipment or musical equipment. Double-check that the policy for which you're applying provides all the features you want.

3. Pick a date and activate the switch. When you've got the new insurance lined up, including a date that it will be effective, you can go ahead and cancel your existing home insurance policy. Call your existing carrier and tell them that you want to cancel. Give them an effective cancellation date. You can also issue a written request to cancel. In that case, email your current company that you'd like to cancel your policy, along with the effective cancellation date. Include your name, policy number, address of the insured property and your basic statement.

"You should make sure you have the home insurance coverage you need from a new policy before you cancel an old one," stressed Worters.

4. Notify your mortgage company. If you carry a mortgage, your lender likely requires you to pay homeowners insurance and needs to know of the change to the new carrier. For those homeowners with an escrow account with the lender, monthly payments sometimes include the payment for the home insurance premium. In this case, your lender forwards the amount to the carrier. Again, you've got to tell them about this change. Even if you pay your home insurance bill directly, be sure to inform your mortgage company to avoid the mortgage company attempting to obtain its own coverage on your home.

This new company you've chosen for your homeowners insurance coverage may require a payment immediately, sometimes before your policy is activated. Sometimes, your mortgage lender may agree to send your initial check on your behalf out of your escrow account.

Be sure that you ask about any refunds that may be coming to you from the home insurance company you’re leaving. For instance, you or your mortgage lender may have paid in full, and you're only halfway through the coverage year. That means you've got half coming back to you.

"If you receive a refund from your old insurance company send it to the mortgage company and indicate for escrow only,” Espenschied said. 

"If you own your home free and clear -- congratulations, the initial monthly payment would be required at the time of binding coverage or if paying in full the entire amount. In many cases, insurance companies will give you a pay-in-full discount,” he added. 

 

Pros/cons of changing home insurance companies

It's pretty easy to see the positives to swapping out your home insurance policy if you can find a better deal. Or you can get better coverage. 

"There are not that many cons when it comes to switching home insurance companies, other than any time spent investigating other companies and getting quotes," said Espenschied.

Penny Gusner, consumer analyst at Insure.com, said it’s not usually a good idea to switch your homeowners insurance during an open claim. Instead, let the company you've been with handle the claim before you leave.

Here are four other reasons that switching homeowners insurance might not be for you:

  • You're already happy with your rates.
  • You like your current policy’s perks and you'd lose them with the new company. 
  • You're pleased with your insurer’s service and you're not so sure about a new company. 
  • You have bundled coverage and like the convenience of having everything with one company.

"Sometimes you want to change homeowners if the price is less than what you're currently paying," Worters said. "However, don't go by price alone. Service is very important. Also, be aware there could be a penalty for canceling coverage. But if you're saving a lot, it might be worth it. Check with your insurer first to see what the cost would be before you decide to switch."

 

How to cancel your current home policy

You're letting go. You're moving on. You'll always remember the good times -- the claims, the reimbursements, the payments. Now's the time to let your homeowners insurance carrier know you're leaving her for another. 

As we indicated earlier, the first thing you need to do is decide on the day your new policy will kick in on coverage. Then, in writing, notify your current agency indicating the effective date you wish to cancel coverage, along with policy number(s). You likely will receive an electronic cancelation form via email so they will have it for their records.

Leave a couple of days of overlap, with the new policy activated before the old policy is officially canceled. You don't want to ever risk a gap in coverage. Really, not even a day. 

When you make the switch, inquire about any refunds that may be coming your way by canceling early.

"Contact your insurance agent and tell him or her that you want to cancel your homeowners policy," Worters reiterated. "Usually, a notice in writing is required. The letter should include your name, address, policy number, your desire to cancel and your cancellation date. This is very important because you want to make sure you don't have a gap with your new coverage taking over. Also, you want to make sure the insurance company refunds any money left on the policy; this is prorated."

 

Pitfalls when changing home insurance

You want to make good and sure there is no gap in coverage between the time you change your policy and when you cancel the other home insurance policy.

"Mortgage lenders require that mortgagees maintain homeowners insurance to protect the mortgagor's investment," said Worters, "so you have to make sure you get the proper proof that you are insured. Another pitfall is you may find another homeowner insurer determines rates differently from your prior insurer and your rates might actually increase. Perhaps you no longer have a loyalty discount for example, or your insurer has had bad experiences with pit bull dogs and won't insure your home, whereas the other company had no problem with pit bull dogs."

Espenschied said that shopping for home insurance is not unlike shopping for auto insurance, with the challenges or pitfalls sometimes being that you cannot find an insurance professional you feel comfortable working with for all your insurance needs.

"The biggest reason most people don't shop for home insurance is because it's automatically paid by the mortgage company and people feel it might be a hassle to switch," said Espenschied. "What you might not realize is that if you lower your home insurance premium, you'll also be lowering your house payment if your mortgage company is collecting every month for the home insurance premium. If you reduce your home insurance premium $600 a year, you've now just saved $50 a month on your house payment."

 

How to shop for a new home insurance policy

You should compare at least three companies before making a decision. Compare even more if you've got the time and want to feel more confident about that decision. Take a good hard look at financial stability ratings, rates in general, complaint data and reviews. In the end, you're making an educated guess.

Don't skip the homework part of your search. If the company you've found with cheaper rates doesn't necessarily have a "gold star" in ratings, or isn't financially stable, is it really worth saving a few bucks?

You can compare homeowners insurance companies by searching on the National Association of Insurance Commissioners for consumer complaints, licenses and financial strength. Also, check Insure.com’s Best Home Insurance Companies

"Whatever you are most comfortable with shopping," said Worters. "Like anything else, depending on the person, shopping online is a preferred method, while others like face-to-face contact with the insurance agent or company representative."

It's extra helpful to have your current policy in front of you while you're making all of these comparisons. Then, you've got a line-by-line reference and not just an overview in your head.

Also, before moving on, ask your current insurer if they can give you a new rate or offer any discounts you may have overlooked or had not been available before.

Here’s what to do and what not to do when switching home insurance companies:

DO

  • Look beyond cost. 
  • Shop around.
  • Research the new company. 
  • Let your soon-to-be old insurer know you want to cancel your policy; don't assume they will cancel it for you.
  • Make sure you compare your policy line by line (category by category) when shopping around, so you're not getting a cheaper policy just because it covers less.
  • Inform your finance company and/or mortgage company of the change if you switch.

DON’T

  • Cancel your current policy before a new one is in effect.
  • Change to an unknown company until you do your research.
  • Be afraid to make a jump to a new company if it proves to be a good fit for you.
  • Worry about losing a bundle if the new company has a lower base rate or other discounts that make it cheaper for you.

"Many people will ask family, friends or co-workers for a home insurance referral," Espenschied said. "Calling around might be a crapshoot. Be careful of giving your information out online; you might find out the company you requested a quote sold your information to 20 different insurance agents."

You can also use Insure.com’s Home Insurance Advisor. The tool asks you a handful of questions to figure which coverage you need. The advisor can help you as you look to switch your home insurance company. 

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