Whether it’s a cozy micro-cabin or a rambling Colonial, your home is probably the single largest purchase you’ll ever make and your biggest physical asset. An investment like that is worth protecting.
That’s where homeowners insurance comes in; it gives you peace of mind that if you were to have major damage or get robbed, there would be funds to repair and restore your home. But what happens when you think it’s time to change your policy?
Here’s what you need to know about switching your homeowners insurance policy, as well as a step-by-step guide to getting it done as quickly as possible and with a minimum of hassles.
Can I Switch Homeowners Insurance at Any Time?
Good news: yes! No matter the reason, you’re allowed to change your homeowner’s insurance at any time. This is good, since shopping around for the right policy can save you a lot of money in some instances.
If you’re shopping for a new home as we speak, it can be a good idea to start looking at insurance before you sign the purchase agreement. And if you’re an existing homeowner looking to save money or simply find a new policy, you absolutely can do so whenever you like. But it’s important to follow the steps in order to ensure you don’t accidentally have a lapse in coverage.
💡 Quick Tip: Homeowners insurance covers three basic categories: the building itself, the belongings inside, and your liability if someone gets hurt on your property.
When Should I Change My Homeowners Insurance?
There are certain events that should also trigger a review of your insurance, including paying off your mortgage (your rates may well go down) and adding a pool (your rates may go up). Also, you may find you are offered deals if you bundle your homeowners insurance with, say, your car insurance; that might be a savings you want to consider.
You never know what options might be available out there to help you save some money. And since homeowners insurance can easily cost more than $1,800 per year, it can be well worth shopping around.
Recommended: Is Homeowners Insurance Required to Buy a Home?
How Often Should I Change My Homeowners Insurance?
You’re really the only person who can answer this one, but in general, it’s a good idea to at least review your coverage annually.
However, it does take time and effort. Sometimes, a cheaper policy means less coverage, so it’s not always a good deal. Be sure you’re able to thoroughly review all the fine print and make sure you know what you’re getting.
Ready to change your homeowners insurance? Follow these steps in order to ensure you don’t accidentally sustain a loss in coverage!
Step One: Check the Terms and Conditions of Your Existing Policy
The first step toward changing your homeowners insurance policy is ensuring that you actually want to change it in the first place!
Take a look at your existing policy and see what your coverage is like, and be sure to look closely to see if there are any specific terms about early termination. While you always have the right to change your homeowners insurance policy, there could be a fee involved. In many instances, you may have to wait a bit to receive a prorated refund for unused coverage.
Step Two: Think about Your Coverage Needs
Once you have a handle on what your current insurance covers, you can start shopping for new insurance in an informed way. You probably don’t want to “save money” by accidentally purchasing a less comprehensive plan. But do think about how your coverage needs may have shifted since you last purchased homeowners insurance.
For example, the value of your home may have changed (lucky you if your once “up and coming” neighborhood is not officially a hot market). Or perhaps you’ve added on additional structures or outbuildings and need to bump up your policy to cover those.
Step Three: Research Different Insurance Companies
Now comes the labor-intensive part: looking around at other available insurance policies to see what’s on offer. Keep your current premiums and deductibles in mind as you shop around. Saving money is likely one of the main objectives of this exercise, though sometimes, higher costs are worth it for better coverage.
Make sure you are carefully comparing coverage limits, deductibles, and premiums to get the best policy for your needs. Also consider whether the policy is providing actual cash value or replacement value. You may want to opt for a slightly pricier “replacement value” so you have funds to go out and buy new versions of any lost or damaged items, versus getting a lower, depreciated amount.
In addition to the theoretical coverage you encounter, it’s a good idea to stick with insurers with a good reputation. All the coverage in the world doesn’t matter if it’s only on paper; you need to be able to get through to customer service and file a claim when and if the time comes!
Fortunately, many online reviews are available that make this vetting process a lot easier. A few reputable sources for ratings: The Better Business Bureau and J.D. Power’s Customer Satisfaction Survey, and Property Claims Satisfaction Study. You can also do some of the footwork yourself by calling around to get quotes, though this is time-intensive and you might want to simply use an online comparison tool instead.
Step Four: Start Your New Policy, Then Cancel Your Old One
Found a new insurance plan that suits your needs better than your current one? Great news! But here’s the really important part: You want to get that new policy started before you cancel your old one.
That’s because even a short lapse in coverage could jeopardize your valuable investment, as well as drive up premiums in the future. Once you’ve made the new insurance purchase call and have your new declarations page in hand, you are ready to make the old insurance cancellation call. Be sure to verify the following with your old insurer:
• The cancellation date is on or after the new insurance policy’s start date.
• The old insurance policy won’t be automatically renewed and is fully canceled.
• If you’re entitled to a prorated refund, find out how it will be issued and how long it will take to arrive.
Congratulations: You’ve got new homeowners insurance!
Recommended: Should I Sell My House Now or Wait
Step Five: Let Your Lender Know
The last step, but still a very important one, is to notify your mortgage lender about your homeowners insurance change. Most mortgage lenders require homeowners insurance, and they need to be kept up-to-date on who’s got your back should calamity strike. Additionally, if you still owe more than 80% the home value to your lender, they may still be paying the insurer for you through an escrow account — so you definitely want to make sure those payments are going to the right company.
💡 Quick Tip: A basic homeowners insurance plan doesn’t cover floods, earthquakes, or sinkholes. If you live in an area prone to natural disasters, you may want to look into supplemental coverage.
The Takeaway
Homeowners insurance is an important but often expensive form of financial protection. It can help you cover the cost of repairing or rebuilding your home if you undergo a covered loss or damage. Since our homes are such valuable investments, they’re worth safeguarding. Plus, most mortgage lenders require homeowners insurance.
Sometimes, changing your policy can help you save money for comparable or better coverage. Reviewing and possibly rethinking your homeowners insurance is an important process, especially as your needs and lifestyle evolve. If you’ve added on to your home, put in a pool, bought a prized piece of art, or are enduring more punishing weather, all are signals that you should take a fresh look at your policy and make sure you’re well protected.
If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.
Photo credit: iStock/MonthiraYodtiwong
Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SOPT0124006