What Happens if I Drop My Home Insurance Policy

Most lenders require you to have a home insurance policy in place before they will grant you a loan to buy a house. Because of this, some hopeful homeowners may choose the first policy they’re quoted. The issue with only getting one quote is that providers, coverage, discounts and costs vary widely, and after an extended period of time with the carrier you’ve chosen, you may start to have second thoughts.

If you are considering dropping your home insurance policy and testing out the waters with another provider, here are a few things to keep in mind.

• Major life events. Life changes, such as getting a dog, having a child or relocating to a new city or state, can mean that your coverage needs have also changed.
• Higher premiums. Premiums can be raised for an array of reasons, including the amount of claims filed in a certain period of time, the age of your home, the region in which you live or dips in your credit score.
• Insufficient coverage or poor customer service. When it’s time to file a claim, you may come to the realization that your coverage is lacking or that your provider’s customer service team isn’t there for you to file a claim that occurs in the wee hours of the morning.
• Unreliable financial state. All insurance carriers are rated by companies such as A.M. Best to determine financial stability and their ability to pay out claims. The higher the rating, the more financially sound the company.

When reviewing your policy or filing a claim, you may realize that you’d be better off with another provider.

The Risks

If you do drop your policy, you risk being subjected to a lapse in coverage. These coverage gaps could cause future providers to raise your premium payments.
But the riskiest situation of all is that lapses in coverage leave you, your home and your finances in a vulnerable state. If your home is damaged or destroyed due to a typically covered peril, such as fire during a gap in coverage, you likely won’t receive any assistance and may have to pay to rebuild your home and replace all of your possessions on your own.

The Rewards

Severing ties with a provider that isn’t meeting your needs can be a great thing. You could be leaving behind inadequate coverage and finding a policy that saves you hundreds of dollars each year and has 24/7 claims services.
A fresh start with better coverage can mean all the difference if or when disaster strikes.

Tips for Dropping Coverage

No matter what your reason is for wanting to drop your coverage, plan ahead. Shop around for a new policy prior to dropping your coverage, and try to plan the drop around the end of your policy period. Doing so can help you avoid cancellation fees.
Leaving your current insurance provider may seem like a hassle. However, finding a carrier that meets your needs will be worth it in the long run.