What Florida Homeowners Should Know Prior to Canceling a Homeowner’s Insurance Policy

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

If you own a residence in Florida, you probably have homeowner’s insurance to protect your investment from property damage or liability claims arising from injuries sustained on your property.  Although property owners take an enormous financial risk by going for any period without homeowner’s coverage, there are situations where a person might elect to cancel their existing homeowner’s coverage, such as the sale of a home or changing carriers. This blog post highlights considerations policyholders should keep in mind prior to termination of their policy.

Refund of Unearned Premiums Might Be Offset against a “Short Rate” Penalty:  The term “short rate” penalty refers to a financial penalty imposed by the insurance carrier for failure to keep the policy in place until the end of the policy term.  This penalty should not be considered a genuine impediment to changing carriers if the premium savings along with the refund of unearned premiums is sufficient to offset the short rate penalty.

Cancellation Penalty: A common reason to change your homeowner’s carrier is because you can save money on premiums.  Although the difference in cost might be substantial enough that the change in policy is justified even after paying a penalty, an informed decision can only be made if you have determined the amount of any penalty you might be charged for cancellation of an existing policy.  If the short rate penalty is 10 percent of the policy premium or it exceeds the savings from the difference in policy premiums, the prudent decision might be to wait until your current policy term expires before switching carriers.  An insured who wishes to make an informed decision needs to ask his or her current insurer about the amount of the unused premium that will be returned and the short rate penalty.

Ensure New Coverage Is Effective: While many people change homeowner’s carriers, property owners should obtain their replacement coverage and ensure the new policy is effective before canceling the original policy.  The benefits and protection provided under both policies also need to be closely compared to ascertain whether you are surrendering valuable forms of coverage that might not justify the difference in premiums.

Do Not Rely on Oral Cancellation: If you have determined that a change in insurance carriers is justified, any cancellation should be in writing.  Even if a policyholder informs his or her representative telephonically of a decision to cancel a homeowner’s policy, this oral notice needs to be confirmed in writing.  The notice of cancellation sent via mail and fax to the insurance agent or insurance company should include the following information:

  • Named Insured
  • Policy Number
  • Telephone Contact Number
  • Address for Forwarding Unearned Premiums
  • Address of the Subject Property
  • Clear statement indicating your intention to cancel
  • Indication of the date the cancellation should be made effective

Along with providing notice to the insurance carrier, the cancellation notice serves other pragmatic functions for the insured.  If the reason for termination of coverage is a transfer of the home to another owner, for example, the insurance carrier will know where to send unearned premiums.  In the event the date you want the policy canceled is 30 or more days in the past, the insurance company might request confirmation of replacement coverage.

Our Miami insurance bad faith law firm invites you to contact us if you are having difficulties with your insurance company.  Miami bad faith insurance claims lawyer J.P. Gonzalez-Sirgo handles property damage claims against insurance companies in Miami and throughout Florida. The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

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