Home insurance is a necessity for a lot of Canadians. After all, it gives homeowners a financial safety net when disastrous events occur around the house, such as fires, floods, or break-ins. That said, there are several reasons why a homeowner may want to cancel their policy.
Are you thinking about cancelling your home insurance? We have all the information you need to make the cancellation process as smooth as possible.
Reasons You May Need To Cancel Your Home Insurance
Let’s talk about why you might want to cancel your policy. Some of the main reasons a cancellation might be in order for you include but aren’t limited to:
- Your Mortgage is Paid Off – Home insurance is only a requirement if you’re still mortgaging your property. Once you’ve paid off your home, you’re free to cancel. However, it’s not always a great idea to live without some form of home insurance, as unexpected weather and damage can still occur.
- You’re Moving – If you’re switching homes, it would make sense to cancel your current policy in favour of another, since your provider might not offer as much coverage or good rates once you’re in a different area. The new home may also have different factors that change your policy’s costs and conditions.
- Your Rates Have Increased – If your insurance rates go up due to your provider’s policies or a change in the housing market, you could pay a lot more for your policy over time. When this happens, many homeowners are tempted to cancel their policy and even switch providers altogether.
- You’ve Decided to Rent Instead – If you’ve sold your property and are now renting a dwelling, home insurance is no longer required. Instead, you can apply for renters insurance, which offers up some similar benefits but may not provide the same type of coverage as a home insurance policy.
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When Can You Cancel Your Home Insurance?
In the end, you may just want to cancel your home insurance because you’re not satisfied with the prices or services offered by your provider. Luckily, you are allowed to cancel your policy whenever you want. However, you should never forget to ask your provider about their policies before you do, since there are right and wrong times to cancel a home insurance policy. For instance:
- In the Middle of Your Contact – If you’re not happy with your policy or you’re moving, you can cancel your insurance ahead of the specified renewal or expiration date. Watch out, this could lead to a penalty for breaking your contract.
- When Your Contract is Up For Renewal – The optimal time to cancel home insurance is when your policy is due for renewal. While your new term and premium can vary based on certain factors, you won’t be charged any penalties.
- During Your Rescission Right – When you purchase home insurance, your provider is legally required to give you a grace period (normally 10 – 15 days), within which you’re allowed to cancel your contract, penalty-free.
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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:
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
What Should You Do Before Cancelling Your Home Insurance?
Fortunately, you can cancel your home insurance at any time, provided you’re willing to pay fees when you break your contract early. Nonetheless, cancelling without lining up another policy may not be smart, so there are a few things to do beforehand, such as:
- Check Your Policy – Read through your current contract and ask your insurer about the consequences of cancelling, as well as the required steps. Whether it’s during your term or after renewal, there will likely be some new conditions to be met, administrative costs to pay and documents to sign.
- Consider the Fees Involved – As mentioned, you could be subject to penalty fees if you cancel your home insurance mid-term. The amount you pay depends on your policy’s conditions and on how early you cancel. For example, cancelling after 3 months is pricier than cancelling after 6 months.
- Think About What You’re Losing – While some home insurance policies are too expensive, it’s probably not a good idea to go too long without buying more coverage, especially if you’re still mortgaging your house. Not to mention, you could lose out on certain perks and benefits.
- Look Into Other Providers – Remember, leaving a gap between your previous and current policies means you won’t be covered if something happens to your home while it’s uninsured. So, it’s best to start researching other providers and compare quotes as soon as possible, even if your mortgage is already paid.
What Happens When You Cancel Your Home Insurance?
Now that you know about some of the consequences of cancelling your home insurance policy before or after its renewal date, let’s discuss what could happen during the cancellation process, as well as the costs you could encounter:
The General Process
- Normally, you will receive a notice from your insurer informing you that your policy will soon expire (at least 30 days prior).
- Start by contacting your insurer’s customer service department. While you can do this by phone, some agencies can set you up with an in-person appointment. Find out if your insurance agent is misleading you.
- Ask your customer representative or agent what it takes to cancel, what kinds of fees are involved and what contract conditions you could be breaching.
- Inform them that you are planning to cancel. Some providers will ask you for an insurance cancellation letter. Don’t forget to record the date of your cancellation.
- If you’re alright with the consequences, get the cancellation confirmed in writing, so you can make the transaction official and keep documents for your records.
- Compare quotes and pick your new insurer. This can take some time, so you should get all your research done before actually cancelling your policy.
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The Costs Involved
- Cancellation Fees – The fees you’re charged for cancelling mid-term depend on your insurer’s policies and the conditions of your contract. If you cancel at the time of renewal, you might still have some administrative fees to pay.
- Loss of Current Discounts – Whether you’re changing insurers before or after your policy ends, be aware that you could lose the benefits you had before, such as accident forgiveness, loyalty or multi-policy discounts and preferred rates.
- New Policy Administration Fees – Although your new insurer may offer better rates, they could still ask you to pay for any administrative services required to activate the policy, like the preparation of documents.
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The Short Rate Table
Some home insurance providers include a cancellation calculator on their website, otherwise known as a short rate cancellation table. This table does a basic calculation of how much cancelling your policy would cost by factoring in these elements:
- When you want to cancel your policy
- How much your monthly or yearly premium is now
- When your current policy is due to expire
- What date you would like your new policy and coverage term to begin
Alternatives To Cancelling Your Home Insurance
If you don’t wish to deal with the financial consequences of cancelling your home insurance mid-term or you’re happy with your current provider, there are several things you can do to get a better policy out of the process, such as:
- Negotiate With Your Provider – Some home insurers are open to a bit of haggling, particularly if you’re a longtime customer with a good payment history. Even a few dollars off your current policy can add up to a lot of savings later on.
- Ask For Discounts – As a new or preferred customer, you may qualify for various discounts. For instance, if you sign up with a multi-purpose insurer, you can often bundle your home and auto insurance together for a better rate.
- Reduce Your Coverage – The more home insurance you want, the more you’ll pay over time. So, you can ask your provider to reduce the amount of coverage you’re getting, in exchange for a lower monthly or yearly premium.
- Increase Your Deductible – Your deductible refers to the amount you pay whenever you file an insurance claim. By offering a higher deductible, your insurer will be more inclined to charge you a more affordable premium.
Home Insurance - FAQs
How to cancel my home insurance policy
- Your full name
- Contact information
- Your policy number
- Address of the insured property
- Mailing address to send any applicable refund
Is there a way to get a refund on my cancellation fees?
- Short Rate Cancellation Refund – In this case, your insurer would deduct certain cancellation fees from your refund amount, if you break your contract early. Monthly premiums, however, may not be refunded at all.
- Prorated Cancellation Refund – Here, you would be reimbursed for however many months worth of premiums you didn’t use while your policy was in effect. That said, some cancellation fees may still be deducted from your refund.
Should I work with an insurance expert to cancel my home insurance?
Can I transfer my policy to another home?
Whether you’d like to find a new home insurance policy or cancel yours altogether, some professional advice might make the process go a lot smoother. However, it is something you can do on your own with a bit of patience. Just keep in mind that speaking with your insurance provider and reading your insurance policy are the most important steps you can take.