An 11-Step Guide to Safely Changing Your Homeowners Insurance

Having the right home insurance is important for all homeowners. Whether you’re a relatively new homebuyer or have lived in your home for decades, it’s a good idea to review your homeowners insurance regularly and make changes when necessary.

But changing a homeowners insurance policy isn’t always as easy as making a quick phone call. In fact, the process of making a change to your home insurance coverage or carrier is one that needs careful consideration. Otherwise, you could end up with incomplete or lapsed coverage — a dangerous situation for one of your largest investments!

To cover this process in a comprehensive manner, we spoke with Patricia Richmond-Young, a top-producing affiliate real estate broker in Shelby County, Tennessee, and Alex Turner, an insurance expert in Brevard County, Florida. With their help, we’ve created this eleven-step guide to changing your home insurance.

A hand switching cords between outlets to symbolize to change home insurance
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Decide why you want to switch

There are several valid reasons for wanting to switch up your home insurance policy. Ask yourself:

  • Are you hoping to save money?
  • Will another company offer bundling discounts?
  • Do you want to change your level of coverage?
  • Do you want better customer service?
  • Does a different policy offer other features?

Richmond-Young recommends reviewing your homeowners insurance policy every six to twelve months, or after any national weather disturbance. In her experience, some insurance companies will put the burden of natural disasters on customers throughout the country.

“You, the insured, could incur a price increase because of something that happened miles or states away from you,” she says. “I think that is a good time to review other options.”

With that advice in mind, watch for price increases that seem out-of-line with normal inflation.

Weigh the downsides of switching

Before you switch, be aware that many insurance companies offer loyalty discounts for long-term customers – sometimes adding up to a 24% savings. Keep in mind that longevity with the company (and therefore your loyalty discounts) would reset upon changing.

In addition, Turner cautions that sometimes making a change to your insurance can end up being more costly in the long run. When you make a home insurance switch, the new carrier often requires professional inspections, which can run between $85 and $150. They will probably also send a company representative out to your property, who could demand repairs or even cancel the new coverage. In the case of older homes, sometimes it’s best to stick with the current insurance carrier rather than risk this kind of scrutiny.

Turner says, “Be mindful about the age and condition of your home and its systems before you switch – particularly your roof. If your new home insurance carrier determines that your roof, water heater, HVAC unit, or electrical systems are beyond their useful life or are no longer in good working order, they will look to cancel your policy within the 30-to-90 day binder period. They may also require you to trim back trees, fix cracks in your driveway, fill in cracks in your stucco, or even clean off mildew.”

A cashier accepting a bill from a man to symbolize how to pay for home insurance when you change it
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Consider how you’re paying for your insurance

According to a CoreLogic data survey, nearly 80% of all homeowners with a mortgage also have an escrow account, which sets aside money for annual insurance and property tax purposes. If you’re part of that majority, your insurance is paid and managed by your loan servicer. That means you’re always entitled to choose – and change – your own home insurance, but you’ll need to involve your lender in the process.

If you have a mortgage loan and you are paying the insurance company directly, contact your lender and find out if they require proof of insurance updates. Make sure to keep your lender updated on any changes to your home insurance policy, no matter how you pay for it.

And of course, if you own your home outright, you’re free to change insurance policies without notifying anyone.

Find your current policy

You’ll want to locate your current homeowners insurance policy before shopping around for new insurance. The information there will be important as you figure out your coverage needs. It will also contain necessary contact information that you’ll need in order to complete the cancellation.

If you cannot find your current policy, check the insurance company website; there should be a field where you can request a copy. If that fails, enlist the help of your loan manager for insurance company contact details.

Read through the details

Once you’ve gotten your hands on your current policy, look through it carefully. Some notable points to find and highlight:

  • Are there any penalties for cancelling before the policy expires?
  • What is your coverage limit?
  • What is your deductible?
  • Is there any limiting language regarding claims?
  • Are there any exclusions (additional structures, special circumstances, etc.)?
  • Do you currently have any discounts?
A flooded kitchen to represent how to change home insurance
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Think through your coverage needs

Now that you know what you have, consider what else you truly need. Richmond-Young says, “Make sure you’re not underinsured, because that could be disastrous should something happen and you lose your home. But at the same time, you don’t want to allow an insurance company to sell you insurance that you may not need or be able to afford.”

As you’re thinking through coverage, ask yourself the following questions:

  • Have you made any renovations or upgrades that increase your home’s value?
  • How much has your house appreciated since you bought it?
  • Have you put in a pool, deck, or dock that may increase your liability?
  • Have you added another structure (shed, solar panels, garage, carport, mother-in-law suite, pool cage, or anything else) that may not be currently covered?
  • Have you made safety updates (roof, windows, doors, security system) that could potentially yield a discount?

If any of these things are true, you may want to start by asking for a policy update from your current insurance carrier. If nothing else, this will create a new baseline and help you compare “apples to apples.”

Shop for your new policy

A local insurance agent can help you identify insurance companies that offer coverage where you live. Because of the nuances of each community, you can often get the most accurate quote from someone who lives where you live. Plus, personalized service can help when navigating contract terms.

Richmond-Young also recommends contacting your real estate agent, no matter how long it’s been since you moved to your home. Since they often connect homebuyers with insurance agents, your real estate agent would likely have several viable local contacts for you to explore.

After gathering a handful of leads, go ahead and start calling around for quotes. Some companies may have an online application option, if you prefer, but then you lose that personalized service.

Using the current policy (along with any new updates) as a guide, ask for each agent’s best rate along with any additional products they may recommend. Make sure that the language and limits used in each quote are the same; if they’re not, weigh those differences in your decision. Don’t forget to inquire about available discounts, including wind mitigation, bundling, and loyalty discounts.

A man signing paperwork who is changing his home insurance
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Obtain your new policy

Once you’ve made your decision, fill out any paperwork and sign the contract for your new home insurance coverage. Your insurance agent should make this process easy for you.

You won’t want any gaps in coverage, so line up your new policy before you cancel your old one. A lapse in coverage may lead to forced place insurance, an expensive home insurance chosen by your lender. Or worse yet, a lapse in coverage may leave you vulnerable for repair and replacement costs if a disaster were to strike in the interim.

“Try to avoid letting your insurance coverage lapse,” Turner says. “Not only does this leave you and your family’s home unprotected, it can also lead to much higher insurance costs when you do have coverage in place again. Most insurance carriers’ guidelines only allow for up to 30 days in lapsed coverage, and quality insurance can be hard to find after that point.”

Cancel your old policy

With documentation of your new policy in hand, go ahead and notify your old insurance agency that you’ll be cancelling your policy.

Be sure to get confirmation that it actually was canceled and it won’t automatically renew. Your old insurance agent or a customer service rep will be able to give you a confirmation email with dated documentation regarding the end of your coverage. If necessary, overlap the two policies by a day or two; remember, a lapse in coverage can put you at risk.

A man picking up the phone to alert his lender that he's changed home insurance
Image Source: (Shutterstock.com/Don Pablo)

Update your lender

After the change has been made, you’ll need to alert your lender. They’ll likely require a certificate of insurance (COI) or some other sort of documentation, along with payment directives. Basically, your lender will want to know where to disburse your insurance payments and how much to collect from you under the new policy.

Figure out if you are due any kind of refund

Because insurance is usually paid in a lump sum once a year, you may be entitled to some money back after you cancel. Refunds should be prorated based on the amount of time you had left under the old policy’s coverage. If the refund is sent directly to you, you’ll need to forward it to your lender if you have an escrow account.

“Many times, changes occur after the mortgage company has already paid for your insurance renewal,” Turner says. “In this case, the lender will have to issue another check to your new company, and you, personally, will receive a refund check from the prior company when cancelled. If the refund check is not applied to your escrow account, you may have an escrow shortage and see your mortgage payment increase despite the lowered insurance costs.”

Making a change to your homeowners insurance definitely requires some forethought. But with some intentional planning, you can safely and effectively make a choice that’s best for you and your property.

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