Sean Bryant3-Minute Read
UPDATED: August 31, 2022
Most people shop around before making a large purchase. You look to find the lowest price on computers, appliances, and even your kid’s toys. But how often do you shop around to see if you’re getting the best rates on your homeowners insurance?
One in three Americans has never shopped around for new homeowners (or auto) insurance policies. Some feel it will take too much of their time or they don’t want to do the paperwork. Others haven’t looked around because they didn’t even know it was an option or they simply don’t know what to do.
Other than your mortgage payment, your combined insurance policies are probably your biggest expense each month. That means it’s crucial to make sure you’re always getting the best rates possible.
Most people pay their monthly homeowners insurance premiums from an escrow account. Unfortunately, this causes them to believe they are unable to make any changes to their policy. Your lender cares less about who your insurance company is and more about whether or not you have adequate coverage.
The obvious time to make a change to your policy would be when you buy a new house. However, if you feel like you’re not getting the best price for your policy, you can actually change companies at any time.
If you’ve completed any home improvements or you live in an area where home values have appreciated significantly, you should be looking to make updates to your homeowners insurance. This could be a modification of your existing policy or moving to a new insurer altogether. However, if there haven’t been any major changes, you should compare homeowner’s policies every 2 or 3 years to make sure you’re getting the best rates and coverage.
Changing your homeowners insurance is a big step, but it can be quick and easy when you know what you’re doing. Here are four steps to take if you’re considering new homeowners insurance.
Before you start comparison shopping for other insurance companies, you need to understand what you want. Start by looking at your current policy. What coverages and amounts are included? If you choose to switch companies, you’ll want to make sure your new policy has very similar coverages.
To make things a little easier when it’s time to compare, write down everything that’s included in your current policy, what your deductible is, and what you pay each month in premiums. This will help you do a side-by-side comparison.
Once you have a good understanding of what you’re currently paying each month and what your coverages are, it’s time to shop. Start by making a list of some of the top homeowners insurance companies and begin the process of getting quotes.
When you’re comparison shopping, it’s important to look for policies that include the same coverages. The last thing you want is to end up with less-than-adequate coverage just to save money. Also keep in mind that if you’ve made any recent home improvements, the value of your home has likely increased. This will affect the premium you pay.
When you purchased your home, your lender most likely set up an escrow account. Each month, part of your mortgage payment is placed in this escrow account to pay for items like property taxes and homeowners insurance.
Once you’ve made the decision to switch insurance companies, it’s important to let your lender know. Not only will they want to make sure you have the proper coverage in case there is a total loss, but they’ll need to make an update to the company receiving funds from your escrow account.
One of the most important steps of the process is to make sure your new policy goes into place before canceling the old policy. This will ensure you don’t have any gaps in coverage, which can lead to trouble if something were to happen.
If you don’t receive written notice that your old policy has been canceled, ask for them to send documentation. Plus, if you’ve paid your premiums in advance, make sure you get a refund upon canceling.