Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Written by Shuman Roy
Content Writer & Entrepreneur Shuman Roy

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Jun 28, 2022

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It’s pretty safe to say most American homeowners have a mortgage loan. And those of us with a mortgage realize that we don’t actually own our home…the bank does. Right?

This is why it’s necessary to list your lender’s “interest” in your home on your insurance policy. You may remember your insurance agent asking for your mortgagee clause when purchasing your policy.

Further, as a result of the recent mortgage crisis, many lenders require borrowers to pay their entire first years homeowner’s insurance premiums at closing via an escrow account.

You Can Shop Around for Homeowners Insurance

So are you stuck with your current homeowners insurance company for the life of your loan, or at least while you have a mortgage escrow account? Nope!

Insurance agents regularly speak with clients who are under the impression that it is either impossible to switch homeowner’s insurance companies or simply too difficult of a process to make a change.

Both assumptions are incorrect.

Switching your homeowners insurance policy may seem daunting, yet changing homeowners insurance companies can be a hassle-free experience.

Let’s take a quick look at the process of switching homeowner’s insurance companies, whether at renewal or in the middle of a current policy term.

The latter of which may be necessary if you are in a financial bind and are looking for a way to lower your monthly expenses.

More often than not, you can switch homeowner’s insurance companies without laying out a single dollar of your own money.

There are really only a handful of reasons why a homeowner may choose to switch homeowner’s insurance companies.

First, and probably the most obvious, is saving money. One of the best ways to save money on your budget is to look at insurance costs.

While homeowner’s insurance costs have risen in the past couple of years, it is not uncommon to shop and find significant savings…especially if you are with a captive agent who doesn’t have the ability to “shop” your rate every year.

Second, you may simply want to add coverage to your home that is not offered by your current carrier (water damage coverage for example).

Finally, you may be forced to seek insurance coverage from another insurance carrier if you are non-renewed, cancelled or your current carrier intends to stop offering coverage in your area or state.

Homeowners policies typically last for a year so you should receive a renewal letter before the policy expires. You can review your policy, make adjustments or simply look for another carrier that offers better rates.

As you research homeowners insurance companies, get quotes with matching coverages, limits and deductibles.

[Top 10 homeowners insurance companies.]

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How to switch homeowners insurance companies?

Start by getting insurance quotes online or contact a local independent agent to see if a cheaper homeowners insurance premium is a possibility for you, or just to obtain more comprehensive coverage to better protect your investment – as not all homeowners insurance policies are created equal.

Once you have some quotes and have determined you can save some cash or increase your coverage by switching, the process is really quite simple.

Note: Be sure to understand how the process differs depending on whether or not you pay your homeowners insurance premium via a mortgage escrow account or out of your own pocket and whether you are switching at renewal or mid-term.

When you have a mortgage on your home, and put down less than 20% of the purchase price as a down payment, the mortgage company may open and manage an escrow account which keeps cash for home-related expenses such as property taxes or homeowners insurance. When you pay the monthly mortgage payment, the amount you’re billed includes the cost of these expenses. Your mortgage company distributes the money accordingly through your escrow.

If Escrowed and Switching at Renewal:

This one is easy. Contact your lender 30-60 days in advance of your policy renewing and tell them not to pay the renewal for the “old” insurer. Once the remaining steps (outlined below) are completed, you simply call your lender back and authorize the payment to the new insurer once the policy is prepared and they are invoiced.

Make sure to call your “old” home insurance company and officially cancel their insurance policy, effective on the renewal date. Of course, if your lender doesn’t make a payment to them; your “old” policy will cancel for non-payment.

If Escrowed and Switching Mid-Term:

Contact your lender or loan servicing company to determine if they will simply make the new payment for you and wait for a refund from the prior insurer. Typically, larger banks that service their own loans (Bank of America or Wells Fargo) will “float” the new payment for you and wait for the refund to re-balance your mortgage escrow account.

You may have to make the payment yourself and wait for your own refund if your mortgage is serviced by a different company than the one who actually carries your note. Either way, a payment is made to the new insurer and the refund from the “old” insurance company replaces the outlaid funds.

If you have to lay out the money personally, you may simply pay on a credit card and apply your premium refund to the next credit card payment…just be sure to ask your previous insurer how long it takes them to cut a refund check and time it accordingly.

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If No Escrow and Switching at Renewal:

This process is identical to switching at renewal with an escrow account except for the fact that you do not have to call your lender regarding not paying the “old” insurer and paying the “new” insurer once the policy is issued.

Again, be sure to call and officially cancel your “old” policy. They will continue to charge your personal account if they have your credit card or checking account information.

If No Escrow and Switching Mid-term:

Just like switching at renewal with no escrow account; you just need a new policy to replace the current policy in addition to officially cancelling the “old” policy to ensure they are not still charging you for coverage.

Tip: Never cancel your “old” policy until new coverage is in place. You never want to be in a position where you have a lapse in coverage.

The process of switching homeowner’s insurance companies is really quite simple and the reality is you don’t have to do anything but decide you want to switch and your agent will take care of the details.

It’s not uncommon for homeowners to switch insurers, and your lender should be quite comfortable with the change, as their main concern is that their asset is insured at all times. You will end up with lender forced coverage in the event you are not able to maintain coverage on your home at all times if you have a mortgage loan.

(photo: trancedmoogle)