Is It Wise to Change Insurance Companies Before a Homeowner's Policy Expires?

Switching your homeowner's insurance company mid-term could lead to savings.
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You can switch your homeowner’s insurance provider at any time for any reason. Whether or not it’s a wise move depends on a number of factors, but in general it’s wise to review your homeowner’s policy periodically and shop around for a better deal.

When to Switch

If you’re like most homeowners, you probably don’t really think about your homeowner’s insurance until it’s time for the annual review. This is when your coverage is up for annual renewal and your insurance provider updates you on any changes to your policy. However, you can shop around at any time for a more affordable plan, or one that offers better coverage. If you find that another provider can offer more protection or save you money, it might be prudent to switch without waiting for your current policy to expire.

When You Shouldn’t Switch

Switching providers while you have a pending claim isn’t a good idea. This could complicate your claim, or prevent it from being paid. If you’re considering a change, it’s best to wait until any and all claims have been processed. Another reason to consider staying put with your current homeowner’s insurance provider is if you have a multi-policy discount. If you have auto, life or umbrella liability insurance with the same company as your homeowner’s insurance, you might be getting savings that would be negated if you switched your homeowner’s policy to another provider.

Things to Consider

Switching your insurance company mid-term might result in more paperwork for you. If you have a mortgage with an escrow account that handles your insurance premium payments, you’ll need to authorize your mortgage company in writing to accept the new policy. Failing to do so could cause your insurance coverage to lapse, which might in turn prompt your mortgage company to obtain coverage of their own choosing and add the cost to your loan. Typically, this type of coverage only protects the mortgage lender rather than the homeowner, so you would still be liable for repairs if any damage occurs to your property while your coverage is lapsed.

Pro Rate vs. Short Rate

In most cases, if you cancel your homeowner’s insurance mid-term, the insurance company will give you a pro rated refund for any months covered by your premium that occur past the date of cancellation. In some cases, however, insurance companies are allowed to issue a short-rate refund in which a penalty fee is deducted from the pro-rated refund amount. Typically, however, this only happens when the insurance company is the one cancelling the policy because the homeowner has failed to pay their premiums.

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