When is the last time you checked your home insurance? It doesn’t have to be a set-it–and-forget-it thing. Switching insurance companies isn’t something you should be afraid of. It isn’t a complex or painstakingly difficult process, but paying close attention to detail can help the situation.
Below are a few scenarios and how to proceed with each. It is always a good idea to talk to a trusted insurance advisor in any situation in which you are unsure.
Switching at renewal. This is when your current policy has completed its term, which is typically one year. Switching at renewal is easy. Just make sure you plan ahead and have coverage with the new insurer before the old policy is set to expire. An important step is to make sure you notify the bank or lender that your mortgage is through that your insurance provider will change.
Mid-policy switch. This requires a few more steps on your part. You will have to apply for coverage through the new company. In this situation, you will also have to cancel coverage provided by the old insurance company. It is important that you do not cancel your existing coverage until your new insurance is effective. Again, you will have to notify your mortgage company so that any loan information can be updated and adjusted accordingly.
Escrow situations. Many homeowners have an escrow account. In these situations, a portion of the monthly mortgage payment is set aside to pay for things such as homeowners insurance and property taxes. It is important to keep the lender in the loop with insurance changes, as changing companies can impact how your mortgage payments are set up and, more importantly, that the payments are sent to the right company!
If you get a refund. Depending on when you cancel your policy, you may receive a refund from your old company for the portion of coverage you paid for but will no longer be using. Be sure you talk with your lender to determine if this money goes to you or to them (escrow situations).
Homeowners insurance is important, but it doesn’t have to be complicated. Your independent agent is an excellent resource in these situations and can guide you comfortably through all necessary steps.