Do I have to wait until my renewal to switch insurance companies in Texas?
The short answer is No.
We get this question often. It seems there are many mistaken assumptions floating around. It's time to clear these up.
A quick refresher: Insurance policies are issued for either 6 or 12 months at a time. When the 6 or 12 months has passed and it's time to begin a new period, that's called the renewal. Most people will wait for a renewal to make a switch, however it’s NOT required nor is it a law.
You have the power to make a switch whenever you want.
The insurance policy belongs to you. You have the power to make changes, and that includes cancelling the policy. You are not obligated by law or anyone else to wait until renewal to switch insurance companies.
Yes, sometimes it's a little less messy to wait until renewal. But it's not required.
So, what happens when I switch insurance companies at other than renewal time?
This is commonly referred to as a mid-term change. So for example, let's say your auto policy renewed April 1 and runs through October 1. You make the switch from Company X to Company Y effective July 1. You paid the full 6 month premium in advance. The prior company would refund the premium for July 1-October 1. This is referred to as unearned premium. Why? Because in essence the company never "earned" the right to use it.
For other than paid in full options, the company would issue a refund by check. In some cases, companies can apply any refund due to the current installment. This is the usual procedure for most policies with the exception of homeowners policies paid via escrow.
My homeowners insurance is paid by my bank, via escrow. How would that work?
Here's where it gets a little messy. But not unmanageable by any means. And if you have a good agent in your corner, he or she can provide the following explanation so you feel more comfortable and know the expectations. Here's the typical procedure....
1. Existing policy is cancelled.
2. Refund check is issued to you, the insured.
3. You endorse the refund check and get it to the mortgage company/bank.
4. Mortgagee is billed for the new premium.
5. Mortgagee pays new premium from funds in escrow.
A tremendous assumption here is that you are switching to take advantage of premium savings. So it would make sense you have enough money in your escrow account (after depositing the refund check) for the bank to cut a new check. If you don't you'll need to make up the difference.
Some banks are really nice in that any additional premium will just be included in the annual "settle-up" of the escrow. When this happens, they'll just add the amount to your new monthly payment.
Again, these are the most common situations we face, and most likely you will too. Just remember, that you are able to switch insurance companies when you want to and a good agent in your corner will help make the process easier.
Looking to switch insurance companies? Call Russell at Best Insurance (979) 297-2655 and we'll make it easy and guide you through the exact process we outlined here. You can also begin a quote request on our website. Insurance doesn't have to be painful OR complicated.