There are many reasons that a homeowner may need to cancel his or her homeowners insurance policy; it happens for a variety of reasons.  Primary causes include moving, purchasing a new policy, changing the coverage limits, or when the property values have increased or decreased.  Homeowners need to make sure the mortgage lender does not have any requirements on cancellation or new policies before making any changes.  There is usually a minimum amount of coverage that the lender will require in order to protect their financial interests in the home.

Beginning the Cancellation Process

Once the mortgage lender has provided their guidelines, the first step in canceling a home insurance is to contact the home insurance company.  Provide them with the policy number and inform them that the policy needs to be canceled, along with the date that it should take effect.  If a new policy is already in place, the original policy should be able to be terminated immediately.  To avoid a potential financial disaster, make sure that there is not a gap in the coverage however.

Putting it in Writing

Inform the mortgage lender in writing that the old policy has been canceled, and include the termination date as well as the start date of the new policy.  The lender will also need the insurance company’s name, the policy number, and coverage limits.  If the homeowner’s insurance policy is paid through the mortgage payments, they will also set up the new payments with the new company.  In order to cancel home insurance, proof of insurance may be required as well;  the new insurance company should include this documentation with the insurance packet.

Getting a Refund

Once the original insurance policy has been canceled, ask the insurance company or agent if there is a partial premium refund due.  Generally there will be an amount of money owed for any unused part of the policy, although some insurance companies may deduct an early-cancellation fee from the refund.  Confirm the amount that is owed and request a check be mailed as soon as possible.  The check should arrive within a few weeks along with a cancellation notice; paperwork pertaining to the refund should be saved.

When the Home Insurance Company Cancels the Policy

The insurance company can cancel home insurance as well, although this should be avoided at all costs; if it happens, they will issue a notice of cancellation in writing.  This can happen if a payment is not received on time, if they determine there was fraud involved in the original application, or if there was a fraudulent claim.  They may also determine that the property no longer meets the policy requirements due to a physical change.  It is also possible for them to decide to not renew the policy at any time during the policy period.

Policy owners can cancel their policies at any time for any reason, but if there is a mortgage lender, they may require that home insurance be maintained.  This protects the lender from any damage that may occur to their collateral, which is typically their primary concern.  Regardless of whether or not home insurance is required, it protects the home and any assets inside, so it is important to keep a policy in place.  When purchasing a new insurance policy, many home insurance companies will help guide new policy owners through the process as well.

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