How to cancel your home insurance policy

Your home is likely your biggest investment, which is why home insurance is an essential element for homeowners, providing financial protection and peace of mind on the off chance the unexpected happens.

However, there may come a time when you either want or need to cancel your home insurance policy. Whether you're moving to a new home, switching insurance providers, or reassessing your coverage needs, it's crucial to follow the correct steps to avoid potential headaches or gaps in coverage. Here’s what you need to know about how to cancel your home insurance smoothly and responsibly.

Reasons why you might need to cancel your home insurance

While cancelling your home insurance is not a decision that should be taken lightly, there are some legitimate reasons why a homeowner might want to cancel their policy. Some of the most common reasons you might consider cancelling your home insurance include:

• You are moving. If you’ve bought a new house, you’ll have no need for insurance coverage at the one you’re departing. Many homeowners simply transfer their policy to their new home, but this is also an excellent time to shop around for a better home insurance rate. Whatever you decide, it's essential to have coverage on your new home before cancelling your old policy in order to avoid any gaps in protection.
• You’ve decided to rent. If you’ve sold your home and have decided to rent your next place, you’ll no longer require home insurance – though you may want to consider tenant insurance, which provides coverage for damage to your belongings and other insurance benefits.
• You’ve paid off your mortgage. Mortgage lenders often require homeowners to maintain insurance coverage as part of their loan agreement. Some homeowners opt to cancel their home insurance policy once their mortgage is paid off and coverage is no longer required. That said, unexpected (and costly!) damage can still occur, so cancelling for this reason is not recommended.
• Your insurance rates have increased. If your rates have increased – either due to changes in the housing market, or your provider’s policies – you could end up paying a lot more over time. In this case, some homeowners opt to either switch providers, or simply cancel their home insurance altogether. Again, it’s not recommended to go without home insurance — if increased rates are an issue, consider shopping around for a lower home insurance rate.

Related: Four easy ways to save on home insurance

When can you cancel your home insurance?

You can technically cancel your home insurance at any time, but it’s important to check your the fine print on your policy for the specifics of what’s involved. Here’s what you need to know, depending on when you want to cancel your policy:

• At-renewal cancellations. The best time to cancel your home insurance is when your policy is up for renewal. That’s because you won’t be charged any penalties.
• Before-renewal cancellations. Cancelling in the middle of your contract, or before the renewal period is always an option, but you’ll likely pay a penalty for breaking your contract.
• Cancellations during the rescission right. Also known as the grace period, the rescission right usually lasts 10-15 days after you purchase your policy. During this time, you can cancel your home insurance contract, penalty-free.

Something to watch out for is auto-renewals on your home insurance. About 30 to 60 days before your policy is up for renewal, your provider will send a notice detailing your next year’s coverage and rates. Do nothing, and you’re essentially agreeing to continue your contract with them.

If you want to cancel or change your policy, you’ll need to notify your insurance provider before the renewal date.

Are there fees for cancelling my home insurance?

While at-renewal cancellations and cancellations during the cancellation period won’t carry any penalties, there are typically fees associated with cancellation mid-contract. Your policy will detail the specifics, but generally speaking, you’ll pay more in penalties the longer you have left on your contract.

In some cases, you may be entitled to a refund – such as if you’ve paid any premiums in advance. Speak to your insurance provider to determine how they calculate refunds.

How to cancel your home insurance

Here are the steps you’ll need to take if you want to cancel your home insurance:

1. Contact your insurance provider and let them know you would like to cancel your policy. Ask if any fees are involved. You may be required to send a formal cancellation letter. If so, make sure it is clearly dated and notes the date you want to cancel your insurance.
2. Ask for a refund of any prepaid premiums, if applicable.
3. If you’re happy with the cancellation terms, have your insurance company provide details of your cancellation in writing in order to make things official.
4. Compare quotes from new insurance providers if you still want or need home insurance coverage.

Once you cancel your home insurance

No matter what the situation is and why you’re cancelling your home insurance, make sure that you’re always covered in case of an unexpected event. If you are cancelling because you’ve paid off your mortgage and feel that you don’t need insurance anymore, you might opt to consider removing some endorsements you don’t need or shopping around for a lower rate first.

Canceling your home insurance policy can be a simple and straightforward process if you follow the necessary steps and communicate with your insurance provider. Remember to review your policy, understand the cancellation process, and be aware of any potential penalties or refunds.

If you're switching insurance companies, ensure that your new coverage is in place before cancelling your existing policy. Doing so will help the transition go smoothly while protecting your interests as a homeowner.