” Consumers need to constantly be mindful of their coverage making sure it still suits them and shouldn’t be afraid to shop around if they feel their insurance is not right for them — Ted Olsen, Vice President Goosehead Insurance, Independent Insurance Broker
With increasing home insurance premiums, changing providers can help first time home buyers save money. Rising inflation, worker shortages, and supply chain delays are some of the economic indicators contributing to rising homeowners’ insurance prices. So more than ever, shopping for competitive rates matters.
However, changing your home insurance company without proper research may result in paying more overall, lapses in coverage and cancellation fees. So here is the question, “What are the risks of changing home insurance companies?” But before getting into this detail, we need to first explore the ways to change insurance plans.
Switching homeowners’ insurance companies can be rather simple if you follow these steps:
Though switching home insurance provider can be beneficial but there are certain issues associated with this move. Here is the list of top risks of changing home insurance:
Switching insurers mid-term can result in unintended gaps in coverage, leaving your home vulnerable to unexpected events, such as fire, theft, or natural disasters.
Timing is the biggest factor of all,” adds Greg Martin, President at Think Safe Insurance. He further says that you should ensure that your new policy is active — also called “bound” — before you cancel your existing one.”
Many insurance policies include penalties for early cancellation. These fees can diminish or negate the financial benefits of switching to a new provider.
Golden Tip: Review your current policy’s terms to understand any cancellation fees and weigh them against potential savings.
Insurers often provide loyalty discounts to long-term customers. Switching providers mid-year may result in the loss of these benefits, potentially making the new policy more expensive in the long run.
A Consumer Reports survey found that 83% of homeowners who maintained the same insurance policy for at least five years experienced rate increases, with about 1 in 10 facing hikes of 50% or more.
If you’ve paid your annual premium in full, it can be difficult to get you a prorated refund when you cancel mid-term. Some insurers may deduct administrative costs, decreasing the amount you receive back.
Recommendation: Before making a switch, confirm your current insurer’s refund policy to ensure you won’t face unexpected financial setbacks.
New insurers may require a fresh assessment of your home’s risk factors, potentially leading to higher premiums or even denial of coverage if issues are discovered.
According to Millenium Brokers, insurance companies strive to assess the risk associated with insuring a property. A change in policy might prompt them to re-evaluate this risk, especially if there’s a significant alteration in coverage.
Finally, you need to have an understanding of the cost implications which you could face in different scenarios. Refer to the following table to see all the details:
Table 1: Cost Implications
| Scenario | Impact | Mitigation |
| Prepaid annual premium | Loss of part of the refund due to fees. | Confirm prorated refund policies. |
| Loss of loyalty or bundling discounts | Higher long-term costs. | Evaluate the value of current discounts. |
| Increased premiums after reassessment | Higher than expected costs with the new policy. | Request a binding quote before switching. |
While switching home insurance companies mid-year can offer potential benefits, it’s essential to carefully consider these risks. Thoroughly evaluate your current policy, understand the implications of early cancellation, and ensure a seamless transition to maintain continuous coverage and financial protection for your home. For more information visit the our website Redhead Home Properties.
However, switching home insurance providers mid-year poses risks like gaps in coverage, cancellation fees, or differing policy provisions. Before making the switch, it’s vital to consider the timing and consequences.
Some insurers will charge cancellation fees if you terminate the policy before the expiry date. Always check the terms of your current policy or ask your insurer how much the change might cost.
If you pay your home insurance through an escrow account, switching providers may create complications with payments. Inform your mortgage lender of the change to ensure continuity of any escrow billing.
If you change your provider midyear, you might pay different rates for premiums based on differences in coverage, discounts, or risk assessment by the new insurer. Always compare cost vs coverage and see if the switch is financially beneficial.
To avoid penalties, the best time to switch is typically at the end of your policy term when you have the opportunity to do so without any cost and with less disruption in coverage. But if there’s a big advantage to switching midyear, just be sure to plan accordingly.
