How do I switch home insurance companies?

24 Aug

One of the best ways to save money on your homeowners insurance is to shop it on a regular basis. Most experts recommend shopping your coverage at least once a year by getting quotes from at least five insurers. 

If you have found a better deal on your coverage it is time to consider a change. Here are a few things to consider when changing up your insurance coverage:

Make sure you are making the right choice: It is important to make sure you are making the right move when switching insurers. Always verify coverage levels and deductibles are the same. Read through the entire policy, looking for exclusions or hazards that are not covered in the new policy. While a cheaper price is everyone’s goal, if the coverage is not as robust or there are dozens of exclusions, changing insurers may not be the right choice. 

When it comes to homeowners insurance there are two types of policies. Replacement value and actual cash value. A replacement value policy will replace your possessions at current market prices while an actual cash value policy takes deprecation into account. This means that the payout for your 10-year TV will be almost nothing. Most experts recommend carrying replacement value coverage. 

Check their Financials: If you are using a well-known, national insurance company such as State Farm, Allstate, Progressive or any of the other large national insurers you can probably skip this step. However, if the best rate is coming from an insurer you are unfamiliar with, you should do a little research. 

Check reviews, paying particular attention to ones involving poor service related to claims. A low premium will not be a bargain if you have problems making a claim. Check their financials as well, an insurer that cannot afford to pay out claims or ends up going under can leave you scrambling to find new coverage. The following companies offer information on the financial strength of insurers:

  • A.M. Best Company  
  • Demotech
  • Fitch Ratings 
  • Moody’s Investor Service
  • Standard and Poor’s Corporation

Verify Your Current Policy Dates: Verify the effective dates of your current policy. This should be located on the declaration page. The majority of insurance policies allow you to cancel at any time but if you have prepaid your premiums you may want to wait until your current policy is expiring to make a change. 

However, if you find a great deal on home insurance it is always possible to cancel and request a refund of any prepaid premiums. There may be cancellation fees so make sure you verify any costs related to cancelling early. 

Purchase a new policy: You should never be without coverage, so it is best to purchase a new policy before cancelling your old one. Once you have found a new policy that works for you, do the paperwork, make your payment and get coverage in place before calling your current insurer to cancel.

In many cases, a new policy may take a few business days to take affect so it is important to verify when the new policy will be in force. Once that date has passed, call your current insurer to cancel the coverage.

Cancel Your Current Coverage: Call your current insurer and ask to cancel your policy and give them an effective date for the cancellation. Let them know you have a new policy in place and are fully covered. While many insurers will accept a cancellation request over the phone, others may require you to send in a written request via email or fax. 

If a written request is required be sure to include your name, policy number, home address and contact information along with a statement requesting cancellation of the policy. Keep a copy of this letter for your records. 

Notify your Lender: If you pay for your insurance via an escrow account with your mortgage company, you may need to notify them of the change. In other cases, your new insurer may deal with this for you, but it is a good idea to verify it has been changed. 

Insurance is a condition of all mortgages so make sure you keep them in the loop and they have the details of your coverage. 

Tags: , , , ,