Are You Planning To Cancel Your Home Insurance Policy ? Read This First!

Posted on: Apr 15, 2024 | 3 mins | Written by: HDFC ERGO Team

Are You Planning To Cancel Your Home Insurance Policy ? Read This First!

The process of cancelling home insurance requires careful consideration of various factors. Understanding the steps involved and the implications of cancellation is crucial to make informed decisions. This guide will explore the process and considerations for cancelling home insurance policies.

Can I cancel my home insurance?

Yes, you can cancel your home insurance policy. However, cancelling it without having a new policy might be risky. Usually, you pay your home insurance premium upfront. So, if you cancel it midway, ensure you get your refund subject to the conditions mentioned in your policy documents.

How can I cancel my home insurance?

Cancelling your home insurance policy is a 5 step process. Let us understand these steps in detail now.

Get quotes, compare and choose the best new policy:

As discussed earlier, cancelling your home insurance without a new policy is risky. So ensure you get quotes from other insurance providers before you cancel your current policy. Once you get the quotes, compare the coverage, the premium amounts, and other significant clauses and choose the one that best suits your preferences.

Inform your current home insurance provider:

There may be various reasons for you to cancel your current home insurance policy. Ensure that you communicate that you would want to discontinue the current insurance and provide reasons for the same.

Provide necessary documents:

Once you have communicated your wish to cancel the current policy and they have agreed to it, ensure you send a written notice along with the necessary documents to ensure that your insurance provider can take further action to cancel your policy. Here is a list of the details and documents you need to submit:

• Your name

• Address of the insured property

• Phone number

• Current policy number

• The date and time of policy cancellation

• Name of new insurance provider

• New policy number

• The new policy’s start date

Inform your mortgage lender:

If you have mortgaged your home to borrow a loan, you must notify your mortgage lender when you switch insurance providers. Generally, the old insurance provider would keep them posted because the lender is a loss payee. However, notify the lender yourself to be on the safer side.

Look out for your premium refund:

You are entitled to a refund of the premium for the period not covered under your old policy. Most insurance providers calculate the premium on a pro-rata basis. They calculate the refund by dividing the remaining days on your policy by the total policy duration, multiplying this fraction by your premium. For instance, with 90 days remaining on a one-year policy, you would receive approximately 25% of your annual payment back.

So, ensure that you receive the proportionate premium of your old policy as a refund.

Is it permissible to cancel home insurance at any moment?

Certainly! You can cancel your home insurance at any point. You are entitled to a refund upon cancellation. Most prominent insurance providers offer prorated refunds, allowing you to cancel anytime and receive reimbursement for any unused premiums. However, in uncommon cases, smaller mutual insurance companies might impose a financial penalty known as a short-rate cancellation fee if you terminate your policy before its expiration date. Typically, this penalty amounts to 10% of the annual premium.

When can I cancel home insurance following the sale of my house?

Ensure that your policy cancellation date aligns with the transfer of ownership of the home. Once you finalise the sale, protecting the property is no longer your responsibility. To determine the official proof of sale date, refer to the purchase agreement or bill of sale associated with the home.

Can I cancel my home insurance coverage without a new one?

Absolutely! You can forgo home insurance if you have purchased your home outright or paid off your mortgage. However, remember, you are exposed to significant financial risk without homeowners insurance. In case of a fire or burglary, you would be responsible for covering the cost of replacing everything out of pocket or accepting the loss.

Conclusion

Cancelling home insurance requires thorough planning and communication with your insurance provider and mortgage lender. While you can cancel insurance anytime, understanding the implications and following the correct procedures is crucial. Always consult policy documents and seek professional advice to ensure a seamless transition and adequate coverage for your property.

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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