For many Canadians, a home is their single biggest investment, which is why home insurance is an essential element for homeowners. After all, it gives homeowners a financial safety net when disastrous events occur around the house. However, your personal circumstances may change. That being said, there are several reasons why you may want to cancel your policy. We have all the information you need to cancel your home insurance policy as smoothly as possible.
How much is the average home insurance policy today?
According to our recent study, $104.15 is how much the average Ontario homeowner pays for home insurance each month. Home insurance offers protection for a whole host of potentially expensive circumstances. Disastrous events, such as fires, floods, or break-ins can be a huge financial blow to your investment. Additionally, in the event that you’re sued for something that happens on your property, such as a delivery driver slipping and falling, your home insurance will pay to defend you in court and/or pay the cost of a settlement.
Looking to cancel your car insurance or home insurance policy mid-term? Our Insurance Cancellation Calculator will help you get a better understanding of how much insurance premium refund you can expect.
Common reasons you may need to cancel your home insurance
There are several reasons why you might want to cancel your home insurance policy. Some of the main reasons a cancellation might be in order for you are:
- No longer have a mortgage: Home insurance is only a requirement if you’re still mortgaging your property. Once you pay off your home, you’re free to cancel. However, it’s not always a great idea to live without some form of home insurance protection.
- Buying a new property: If you’re switching homes, it makes sense to cancel your current policy in favour of another, since your provider might not offer as much coverage or good enough 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 increased: Your insurance rates go up due to your provider’s policies or a change in the housing market. When this happens, many homeowners are tempted to cancel their policy and even switch providers altogether.
- Downsizing/deciding to rent: If you’ve sold your property and are now renting a unit, like a basement apartment, home insurance is no longer a requirement. You can now apply for renter’s insurance which offers some similar benefits to a home insurance policy.
Why you may not be able to cancel your home insurance policy
There are a few situations where being able to cancel your home insurance policy is not ideal:
- If you have a mortgage. Your lender will make it a condition of the mortgage that you keep your home insured at all times. If you cancel your home insurance, your mortgage lender can recall the mortgage (demanding you pay it back in full immediately). If you’re unable to do so, lenders may exercise their power of sale or choose to foreclose on your home.
- Condo dwellers. Should you own a condo unit; you have a similar obligation to your condo corporation to maintain home insurance coverage at all times. If you cancel your home insurance, you can be sued for failing to maintain an adequate amount of condo insurance. In rare cases, you may be forced to sell your unit for breaking your condo’s bylaws.
If you don’t have any agreements that legally require you to keep your home insurance, and you’re willing to take on the risk yourself, then you’re free to decide to cancel your home insurance.
When can you cancel your home insurance policy?
In some instances, you may just want to cancel your home insurance because you’re not satisfied with the prices or services from your provider. Luckily, you are able to cancel your policy whenever you want. However, you should never forget to ask your isure broker about your policy stipulations before you do. There are right and wrong times to cancel a home insurance policy:
- Before renewal cancellations. If you’re not happy with your policy or you’re moving, you can cancel your insurance ahead of the renewal or expiration date. Forewarning though, this can 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 as a result of certain factors, you won’t face any penalties.
- Cancellations 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 able to cancel your contract, penalty-free.
You can technically cancel your home insurance at any time, but it’s important to check the fine print on your policy for the specifics of what’s involved.
3 conditions to consider before cancelling
There are a few things you should keep in mind before cancelling:
- There may be a cancellation fee. Most insurance companies charge what’s called a short rate fee when you cancel your home insurance before your policy renewal date. These fees vary by company and depend on where you are in your policy term. The penalty will be lower if you cancel towards the end of your term, say, versus if you’re only four months in.
- Your policy must be in good standing. If you miss a payment, you’ll have to pay the full amount of the outstanding payment before you can cancel.
- Your insurance can actually go up. Depending on your current rate, if you switch to another provider, you may end up paying more. If you’re thinking about switching your home insurance provider, be sure you do your research and contact your isure broker before you commit to cancelling your policy.
The best time to cancel your home insurance is when you sell your home. It’s likely to be a condition of the sale that you’ll maintain insurance until the date the new owners take possession. It’s best to hold off on cancelling your policy until after the sale closes so you won’t be left uninsured if the deal falls through.
If you are curious about whether you will qualify for a refund on your premium or if you’ll be charged fees, be sure to check out the difference between Pro-rated and Short-Rated fees here.
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:
- Check your policy: Read through your current contract and ask your insurer about the consequences of cancelling, as well as the required steps. 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 may be subject to penalty fees if you cancel your home insurance mid-term. The amount you pay will depend on your policy’s conditions and how early you cancel.
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.
- 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. This is especially true if you’re still mortgaging your home. Not to mention, you can lose out on certain perks and benefits.
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:
- Negotiate with your provider: Some home insurers are open to a bit of haggling, particularly if you’re a long-time client with a good payment history.
- Ask for discounts: As a new or preferred customer, you may qualify for various discounts. You can often bundle your home and auto insurance policies 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.
Skipping optional coverage like sewer backup may help to lower your monthly fees, but isn’t advisable. Instead, it’s also a good idea to compare insurance rates every year before your policy renews. This will help ensure you’re getting the best deal on the coverage you need.
- 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 a more affordable premium.
Cancelling your home insurance policy: The bottom line
Cancelling 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. Contact one of our isure representatives to help assist you in cancelling your home insurance policy. Doing so will help the transition go smoothly while protecting your interests as a homeowner.