Can You Cancel Home Insurance?
Home Insurance Basics: How to Cancel Insurance
Home insurance is a concept that many homeowners are familiar with. After all, getting home insurance is one of the most important steps in homeownership.
Your home insurance protects you, your family, and the contents of your home from loss and damage. It exists as peace of mind for you should you ever encounter an emergency situation in your home.
However, there might be situations where it makes sense for you to cancel your home insurance. We’re going to walk you through some of the situations where you might feel that cancelling your home insurance makes sense. Then, we’ll take you through the specifics of cancelling home insurance, and how best to undertake it.
We know that simply getting and having home insurance can be one of the more challenging situations a homeowner is faced with. We also know that cancelling that same insurance can be confusing, upsetting, and downright hard.
When Might You Want to Cancel?
Many people first get home insurance as part of their mortgage process. Since it’s a requirement for people with mortgages to carry home insurance, this is a logical step. However, did you know that once you’ve paid off your mortgage, you don’t need to continue your home insurance?
There could be financial reasons why you no longer want to have home insurance, and if your mortgage is paid off, you’re no longer obliged to continue.
If you’ve decided to rent, instead of own your home, you might want to reconsider your home insurance. Renter’s insurance might be a much better choice for you. This would be much more consistent with your living situation and could be a way to save money.
If you move, your current home insurance policy might no longer be the best choice. Your plan might not cover all the specifics of your new home. If you can bring your old policy over to your new home, you might get a different rate in a new neighbourhood. This rate could be higher or lower than your current rate, and cancelling your home insurance might make sense if another insurer can offer you a better rate in your new neighbourhood.
When home insurance rates increase, policyholders are often tempted to cancel. You could be able to find a better rate at a different insurer.
Now that you are more familiar with some of the reasons why people might cancel their home insurance, we’ll talk a bit about the times to cancel.
Different Times to Cancel
There are different times you can cancel your home insurance, with regards to your contract. These different times have different costs and penalties associated with them. For that reason, we recommend you pay special attention to this section if you’re thinking of cancelling your home insurance policy.
Similar to other types of insurance, cancelling during your contract renewal period likely carries no additional penalties. That makes it the ideal time to cancel. There could be other mitigating circumstances, but the general rule applies here.
The other time it might be best to cancel your insurance policy is during the period known as your rescission right. Legislation in Canada outlines that there is a short period at the beginning of your contract when you can safely cancel, without facing penalties. The length of this time period varies depending on the insurer, and the plan. A normal amount of time for this period to last is 10-15 days.
Lastly, we have a more challenging time to cancel your home insurance: during your contract. Your contract outlines the term that you agree on for your home insurance (normally 1 year). If you decide you need to cancel your insurance before this period is up, you could be charged penalties for ending your contract early. That makes this a less-desirable time to cancel.
Home Insurance Cancellation Checklist
Now that you understand the different reasons and times to cancel your home insurance, we thought it best to walk you through some things you should do before you cancel.
Firstly, you should consider the fees and penalties we’ve talked about. If you’re in the middle of your contract, you could be paying a hefty fine to cancel. We’ll talk a bit more about the specific ways these costs are calculated later, but for now, you just need to understand that the price is higher the earlier into your contract that you’re cancelling. If at 6 months through your contract you cancel, it’ll cost you more than cancelling at 10 months.
Another thing that you should be considering is reading through your contract. Every home insurance contract is different, and the specifics of your contract could influence your decision heavily.
Finally, we suggest that you strongly consider looking at other providers. If you have an issue with your current provider, remember that other insurance providers could offer a home insurance plan that more closely aligns with your goals and needs. However, if you are cancelling your home insurance and don’t plan to renew, you can skip this part.
Short Rate
A topic we know needs to be discussed is the short rate. If you look online, you’ll probably be able to find a short rate calculator. There’s a chance your insurance provided even provides one. The short rate refers to the cost associated with cancelling your insurance policy early. It takes into consideration how much longer you have on your policy, and the respective fees. This can be a useful tool to help you visualize the cost cancelling, and can help inform your overall decision.
What Happens Now?
Generally, cancelling your home insurance is a pretty standard event. If you’re planning on cancelling when your policy expires, you should reach out to your insurance agent when you receive the notification that your policy is up for renewal.
Your agent should be able to explain to you the specifics of your plan and let you know what the costs will be if you cancel. Oftentimes, your insurance provider will ask for a written copy of your intent to cancel your home insurance. A written letter, signed and dated will usually suffice but check with your agent to be sure.
If you’re planning on getting a new policy with a different provider, don’t wait. Since there can be a delay while changing policies, you want to get this process started as quickly as possible.
Frequently Asked Questions
Can I cancel home insurance at any time?
The simple answer is yes. You do have to be prepared to pay penalties if you cancel before your policy term is up.
Can I switch home insurance at any time?
Again, yes you can. There will likely be associated costs and penalties associated with canceling out of term, so consider those before you make your decision.
