How to Cancel Home Insurance

Need to cancel your home insurance? Be sure to do your homework on what’s involved and whether or not you will be subject to any early cancellation fees.

WRITTEN BY
Priya Correia
Updated November 26, 2020

Your home insurance can offer you financial coverage for any damages that may happen to your home or the contents within it. But at some point, you may want to cancel your policy for a myriad of reasons. 

Before you do, be sure to do your homework on what’s involved and whether or not you will be subject to any early cancellation fees. 

Reasons You May Need to Cancel Your Home Insurance

Considering how important home insurance is to protect your home — not to mention the fact that lenders typically require a policy to be in place before you can secure a mortgage — why would you want or need to cancel your insurance coverage? Here are a few reasons:

  • Your premiums have increased. If your current insurance provider has recently increased its rates, you may want to switch insurers to find a lower rate and save money. 
  • You are moving. If you are selling your home to move to a different region, you’ll no longer require a policy on the property once you vacate it. Plus, your provider may not offer insurance in the location you are moving to. 
  • You’ve decided to rent instead. If you’ve sold your home and are now renting, you don’t need home insurance any longer. Instead, you may want to look into renters insurance.
  • Your mortgage is paid off. Once your mortgage has been fully repaid, you won’t be required to have a home insurance policy anymore. Your mortgage lender no longer has any say in the matter. While not recommended, it’s still an option that you will have. 

Worried about your mortgage? Consider getting mortgage life insurance.

Can You Cancel Your Home Insurance Whenever You Want? 

Yes, you can end your home insurance policy at any time. You will just have to let your insurance provider know of your intention to cancel your policy and when you want it to end. 

If you are cancelling to sign up for a new plan, make sure that there are no gaps in coverage from the point of cancellation of your current policy to the point of activation of your new policy to avoid any lapse in coverage.

Having said that, the best time to cancel your policy is when it is up for renewal. That way you can avoid any risk of being charged any administrative or early termination fees. 

You can also cancel without repercussions if you end the policy within a short time after signing the contract known as the “recission period.” This time frame — which is usually anywhere from 10 to 15 days after signing your contract —  provides you with some time to go over your agreement and gives you the right to cancel without penalty if you’ve changed your mind. 

Live in a Condo? Check out the benefits of getting condo insurance.

Can I Get a Refund on my Premiums Paid?

You may be able to get a refund on premiums if you’ve paid them in advance. For example, if you are charged annually and pay upfront, you may be able to get your money back for monies already paid and not put in use. To calculate your refund amount, insurance companies will take one of two approaches:

Prorated refund. In this case, you will be refunded for the entire amount of your premiums that were not used. For instance, if there were 6 months still left on your policy, you would get a refund for the prorated amount for those 6 months. 

Short rate refund. With this calculation, your insurance company would deduct the cancellation fee from your refund as a penalty for terminating the policy early. Insurance providers often use a “short rate table” when a policyholder requests the cancellation of a home insurance policy, as mentioned earlier. 

The “short rate table” considers the costs involved with administrative duties to terminate the policy prior to its expiration and helps insurers perform basic calculations of how much the cancellation of a policy will cost. It is based on the following factors:

  • When you want to terminate your insurance policy
  • Amount of the monthly or annual premiums
  • The expiry date of the current policy 
  • The date you want your new policy to start

Things You Should Do Before You Cancel Your Home Insurance

Before you go ahead and terminate your home insurance plan, there are a few measures you should take first. 

Check the terms of the policy. Review your contract to verify its terms and your contractual obligations. There may be certain administrative costs of early cancellation fees that you may have to pay, so you’ll want to verify what these are before you cancel. The contract may also outline what steps you would have to take to cancel your policy. 

Get quotes from other insurance providers. Unless you are no longer going to be a homeowner, you’ll likely still need a home insurance policy in place, whether it’s for a new home or for your current home with a different provider. 

To avoid any gaps in coverage, be sure to look into other insurance companies and get quotes to compare amongst each other. Otherwise, you could be left paying a hefty bill out-of-pocket if you are not covered and something happens to your home in the meantime. 

Consider your current policy term and the new policy date. Verify when your current policy expires versus when you want your new policy to start. That way there will be no risk of being uncovered for a given period of time.  

Thinking about switching providers? Check out these tip on how to buy home insurance.

Costs of Cancelling Your Home Insurance

There may be some costs associated with cancelling your home insurance policy that you may want to be aware of.

Early termination fees. Not all insurance companies charge a fee for cancelling a policy, but many do. Of course, you’ll need to pay for the days, weeks, and months that your home has been insured. If you paid for your policy upfront, you will get the rest of your money back, minus the cost of the time your home has already been insured. Otherwise, there may be an early termination fee charged, which typically includes administrative costs to terminate the contract. 

Loss of discounts. If your current insurance provider has been offering you a discount up to now, you stand to lose these benefits if you end your policy and switch providers. Such discounts can include things like loyalty discounts, accident forgiveness, or multi-policy discounts. 

Administration fees for a new policy. You may be switching to take advantage of lower rates with a different insurance company, but there may be administrative fees associated with activating your new policy.

Cancellation fees typically work out to be anywhere from 2% to 7% of your premium.

Alternative Ways to Cancel Your Home Insurance

If you discover that there are some hefty cancellation fees that will accompany your contract termination, you may want to consider some alternatives, such as the following:

Haggle with your insurance company. There’s no reason why you can’t negotiate with your insurance provider to reduce your premiums if you’ve been a client for years and have a long track record of making timely payments with no claims filed. 

Request a discount. Your insurance provider may offer discounts in certain circumstances, such as bundling other insurance products. 

Increase your deductible. If you ever have to file a claim, you will have to pay a deductible before your policy kicks in. Opting for a lower deductible when you first sign on with your insurance company means your premiums will likely be higher. But if you request a higher deductible, your premiums can decrease. 

Reduce your coverage. Perhaps your current policy is comprehensive and covers a wide range of issues. In exchange for more comprehensive coverage, you’ll be paying higher premiums. To reduce your premiums, consider reducing your overall coverage. 

Let your policy lapse. In some cases, it may just be worth it to ride out your policy until it expires rather than go through the hassle of cancelling it early and paying an administrative fee. This is a good option if you only have a few months left in your policy.

How to Cancel Your Home Insurance Policy 

To cancel your home insurance policy, all you need to do is contact your insurance company and provide them with information such as:

  • Your full name
  • Contact information
  • Your policy number
  • Address of the insured property
  • Mailing address to send any applicable refund

Ask the representative you’re speaking with to send you written confirmation of the cancellation of the policy. And if you are still paying a mortgage for the home, you will need to inform your lender that you are cancelling your policy. They may also ask for the details of your new home insurance plan. 

Can You Transfer Your Home Insurance Policy to Your New Home?

Insurance companies don’t usually allow the transfer of a policy from one property to another. That’s because your policy is specific to the condition of your home and the details associated with it. Instead, you would likely have to cancel your current policy and take out a new one for your new home, which you can do with the same insurance provider or with another. 

Final Thoughts

Whether you’re selling your home, have paid off your mortgage, or are looking for lower premiums — there are plenty of reasons why you may want to cancel your home insurance policy. If that’s the case, you may be faced with early termination fees, depending on your situation and the insurance company you hold your policy with. If you’re looking for a new policy, be sure to do your homework to compare plans and rates before signing a new contract.