August 8, 2025

Post-Close: What If I Change My Policy?

Learn how to switch your homeowners insurance after closing, avoid costly coverage gaps, and keep your lender in the loop.

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The closing is behind you, but your insurance needs might evolve. Whether you want better coverage, lower premiums, or need to switch due to cancellation, changing your policy after closing is completely doable. The key is understanding what steps to take and potential pitfalls to avoid.

Bottom line: You can change your homeowners insurance after closing, but you must notify your lender and maintain continuous coverage to avoid expensive force-placed insurance.

Your Right to Choose

Your mortgage lender cannot dictate which insurance company you use. They can only require that you maintain adequate coverage that meets their loan requirements. This means you have the freedom to shop around and switch providers whenever you find a better deal or need different coverage.

The mortgage industry sees policy changes frequently. Homeowners switch for various reasons including rate increases, poor customer service, or coverage gaps discovered after moving in. As a homeowner, you get to select your home insurance provider or decide when you'd like to switch carriers.

Auto loans work similarly. Car owners can switch insurance carriers as long as the new policy meets the lender's minimum requirements for comprehensive and collision coverage.

Common Reasons People Change Policies

Understanding why homeowners make changes can help you evaluate your own situation:

Cost-related changes:

  • Annual premium increases that strain your budget
  • Finding better rates through comparison shopping
  • Qualifying for new discounts with different insurers
  • Bundling opportunities with auto or other insurance

Coverage-related changes:

  • Discovering your current policy lacks adequate protection
  • Needing specialized coverage for home improvements
  • Wanting higher liability limits after reviewing your assets
  • Adding coverage for valuable items acquired after closing

Service-related changes:

  • Poor claims handling experience
  • Unresponsive customer service
  • Difficulty reaching your agent when needed
  • Company going out of business or leaving your area

The insurance landscape changes constantly. In response to extreme weather events and natural disasters, some home insurance companies are going out of business. In states like Florida and California, several insurers have stopped selling policies.

The Escrow Account Factor

Most mortgage holders pay insurance premiums through an escrow account rather than directly to the insurance company. This adds a layer of complexity when changing policies, but the process remains straightforward if you follow the right steps.

Here's how escrow works with your insurance: Your lender creates an escrow account for you and uses your payments to pay the mortgage, homeowners insurance bill, property tax, etc., all in one shot. When you change policies, both your old and new insurance companies will communicate with your lender, but you need to coordinate the timing.

Important escrow considerations:

  • Your monthly payment amount may change with the new premium
  • Refunds from your old policy typically go to the escrow account
  • The lender needs proper mortgagee clause information for the new policy
  • Any escrow shortage could increase your monthly payment temporarily

Auto loans with gap insurance or comprehensive coverage work similarly when financed through a payment plan that includes insurance costs.

Step-by-Step Process for Changing Policies

Before You Switch

Start by shopping for quotes at least 60 days before your current policy expires. It's important to review your current policy's homeowners insurance declarations page to find out when your coverage ends. This gives you time to compare options without rushing into a decision.

Instead of manually gathering quotes from multiple companies, consider using Covered to simplify the process. Covered does the shopping for you by pulling quotes from several top insurance carriers in a single search. This saves you time and helps you find the best mix of price, perks, and coverage. It's a smarter way to compare options and switch easily.

Making the Switch

Once you've selected a new policy, coordinate the effective dates carefully. You can set up your new policy to go into effect the same day as your current policy ends. Never let your coverage lapse, even for a single day.

Critical timing steps:

  1. Purchase your new policy with an effective date that aligns with your current policy's expiration
  2. Ensure your new policy includes the correct mortgagee clause with your lender's specific information
  3. Cancel your old policy effective the same date your new coverage begins
  4. Notify your mortgage servicer immediately about the change

After the Switch

Your old insurance company should send a cancellation notice to your lender, while your new company sends updated policy information. While the lender should receive this information, it's a good idea to give them a heads-up. A quick phone call can preemptively clear up any confusion.

Handle any refund properly. If you switch your homeowners insurance coverage in the middle of a term, you should receive a refund from your old insurance provider for the unused coverage. If you have an escrow account, this refund typically goes to your lender to credit your escrow balance.

The Mortgagee Clause Requirement

Your new policy must include a mortgagee clause that properly identifies your lender. This isn't just your lender's regular business address. The mortgage clause defines how your mortgage lender should be listed. And it includes your lender's official name and their unique address for insurance documents (this is often a separate address).

Get this information directly from your mortgage servicer. Using incorrect mortgagee information can delay the process and potentially trigger force-placed insurance.

Avoiding Force-Placed Insurance

Force-placed insurance is expensive coverage your lender can purchase if they believe you lack adequate protection. Force-placed insurance can be much more expensive than a regular policy and may not provide the coverage you personally need.

The consequences extend beyond higher costs. Force-placed policies often do not provide as much coverage as a typical homeowner's policy. For example, force-placed policies sometimes only provide coverage on your dwelling up to the amount owed to the bank, not the full value of your property.

How to prevent force-placed insurance:

  • Maintain continuous coverage without any gaps
  • Ensure your new policy meets your lender's minimum requirements
  • Notify your lender promptly about any policy changes
  • Respond quickly to any insurance-related notices from your servicer

Under federal law, your mortgage servicer has to notify you at least 45 days before it charges you for force-placed insurance. If you receive such a notice, act immediately to avoid the expensive coverage.

Special Situations to Consider

When Your Policy Gets Cancelled

Insurance companies can cancel or non-renew policies for various reasons. Sometimes a nonrenewal may be the result of a business decision. It's not uncommon for insurers to stop insuring homes in areas where the crime rate or risk of natural disaster has increased.

If your policy gets cancelled:

  • Start shopping for replacement coverage immediately
  • Contact your current insurer to understand the reason for cancellation
  • Consider your state's FAIR plan if standard coverage isn't available
  • Make necessary property improvements that might help with replacement coverage

After Paying Off Your Mortgage

Your obligation to have homeowners insurance goes away after paying off your mortgage. However, this doesn't mean you should cancel your coverage. You'll want to review your policy with your agent to ensure it still meets your needs without the lender's requirements.

When the mortgage is paid off:

  • Contact your insurance company to remove the mortgagee clause
  • Set up direct payment since your lender will no longer pay from escrow
  • Consider adjusting coverage limits based on your current needs rather than loan requirements
  • Review your liability coverage to protect your other assets

High-Risk Areas and FAIR Plans

If you live in an area where private insurers are reluctant to provide coverage, you have options. Most U.S. states and the District of Columbia provide insurance programs called Fair Access to Insurance Requirements (FAIR) plans, or a similar program.

Through FAIR plans, everyone can have a basic level of protection from catastrophes. However, it typically costs more than a standard policy. While more expensive than standard coverage, FAIR plans prevent the much higher costs of force-placed insurance.

Cost Implications of Changing Policies

Switching policies can affect your budget in several ways. If you secure a lower premium, your monthly mortgage payment may decrease if you have an escrow account. Conversely, higher premiums will increase your monthly payment.

Potential costs to consider:

  • Premium differences between old and new policies
  • Possible escrow adjustments if switching mid-term
  • Any inspection fees required by the new insurer
  • Potential rate increases if you have recent claims

Life insurance policy changes work differently since they're not typically tied to loan requirements. However, beneficiary updates may be necessary if your mortgage situation changes.

Red Flags That Require Immediate Action

Some situations demand urgent attention when changing policies. If you receive any notice from your lender about insurance deficiencies, respond within the timeframe specified to avoid force-placed coverage.

Warning signs that need quick response:

  • Notice of pending force-placed insurance from your servicer
  • Cancellation notice from your current insurer with less than 30 days remaining
  • Claim denial due to insufficient coverage limits
  • Changes in your area's risk profile affecting availability

Pet insurance changes are much simpler since they're not connected to property loans, though some homeowners policies exclude certain breeds from liability coverage.

Working with Professionals

Insurance agents and mortgage servicers are your primary contacts during policy changes. Independent agents can be particularly valuable since they work with multiple companies and can help you compare options objectively.

Your mortgage servicer's insurance department handles policy change notifications and escrow adjustments. Keep their contact information readily available and don't hesitate to call with questions about the change process.

Takeaways for Successful Policy Changes

Changing your insurance after closing is a routine process that thousands of homeowners complete successfully each year. The critical factors are maintaining continuous coverage, proper communication with your lender, and ensuring your new policy meets all loan requirements.

Action steps for changing your policy:

  1. Shop for quotes well before your current policy expires
  2. Coordinate effective dates to prevent coverage gaps
  3. Verify mortgagee clause information with your servicer
  4. Notify all parties immediately after making the switch
  5. Handle refunds appropriately to maintain your escrow balance

Remember that your insurance needs may change over time. Regular policy reviews help ensure you maintain adequate coverage at competitive rates while meeting your lender's requirements.

The mortgage industry expects and accommodates policy changes. By following proper procedures and maintaining continuous coverage, you can switch providers whenever better options become available.