How to Switch Home Insurance

1. Review Your Current Insurance Policy

What your homeowners insurance policy does and doesn't cover may not be something you think about very often. But if you plan to change companies, it's a good idea to review your existing coverage to check your policy limits, term, premium, deductible and add-ons that may provide extra protection a standard policy doesn't offer.

A simple way to do this is to look at the policy's declaration page—it provides a snapshot of your existing coverage. It's also a good idea to find out if your insurance company charges an early termination fee for canceling your policy before the term ends.

2. Review Your Coverage Needs

If you've been renewing your existing policy without much thought about whether the coverage you have still meets your needs, complete a coverage audit before buying a new policy. Here are a few things to consider:

• Policy limits: Most home insurance policies provide four types of protection: coverage for repairing or rebuilding your home, replacing your belongings, defending you in a lawsuit and additional living expenses if your home is uninhabitable while it's being repaired. Choose limits that provide enough protection if you need to file a claim.
• Add-ons: Standard home insurance policies don't usually cover damage caused by floods, earthquakes, sewer back-ups and more. Adding one or more riders, also known as endorsements, to your policy provides added protection for specific exposures, but availability varies by company.
• Deductible: A deductible is the amount you have to pay before your insurer will pay for a covered loss. Higher deductibles typically result in lower premiums, but if you need to file a claim, you'll pay more out of pocket before your insurance coverage kicks in.

3. Shop Around

Premiums can vary significantly among insurance companies. To find the coverage you need and get the best price you can qualify for, compare quotes from multiple insurers before making the switch. Just be sure you're comparing apples to apples when reviewing quotes. All policies should include the same coverage, policy limits, exclusions, deductible and endorsements.

While price is undoubtedly an important factor in selecting a policy, it's not the only one to think about. Here are a few others to consider.

• Carrier rating: Various agencies, including A.M. Best, Fitch and more rate the financial stability of insurance companies, indicating the company's ability to pay a claim should you need to file one.
• Customer satisfaction: J.D. Power ratings and the National Association of Insurance Commissioners (NAIC) complaint index provide insight into other customers' experiences with various insurance companies.
• Recommendations: Sometimes, the best way to find a company that meets your needs is by asking the people you know and trust. Friends and family can be a great resource for finding companies they've had good experiences with and those they'd recommend you steer clear of.

4. Purchase Your New Policy

After reviewing your options, decide which policy is best for you and buy it. Find out when the new coverage goes into effect so you don't cancel your old policy too soon, leaving a gap in coverage.

5. Cancel Your Old Policy

When your new coverage is in place, you can cancel your old policy without risking a lapse in coverage. This part is crucial. A lapse in coverage can result in higher premiums for future policies, and your lender may purchase force-placed insurance to protect their financial interest in the property. These policies tend to be significantly more expensive than standard homeowners insurance and provide only minimal coverage. Perhaps worst of all, you won't have coverage if you need to file a claim, leaving you on the hook for all repair costs.

Be sure to get written confirmation that the insurer canceled your policy, and find out if you get a refund for premiums you prepaid.

6. Contact Your Lender

Most lenders require homeowners to have insurance if they take out a mortgage. If you have an escrow account attached to your mortgage loan, each month the lender deposits part of your monthly payment into the escrow account and uses it to pay your property taxes and home insurance premiums when they're due. When switching insurers, it's important to let your lender know so they can send your insurance payment to the right company.

Learn more: Do You Have to Have Homeowners Insurance?

Frequently Asked Questions

Should You Make the Switch?

Switching home insurance companies may not be right for everyone. But if your current insurer doesn't offer the coverage you need, you're unsatisfied with the service you've been receiving or you want to find a better price, you can switch at any time by following the steps outlined above.

If price is the driving force behind your desire to change companies, check your credit score before you start shopping for a new policy. Insurers in most states may use credit-based insurance scores in their premium calculations. Although it's just one factor companies consider, people with stronger credit histories generally qualify for lower rates.