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Can I cancel my home insurance?

You may want to cancel your home insurance policy if you can find a cheaper rate with someone else. We can help you shop the market in as little as 5 minutes to see if you're getting the best home insurance rate.

This piece was originally published on April 22, 2021, and was updated on December 31, 2022. 

Whoops, there goes another $104.15 this month.

According to our recent study, is how much the average Ontario homeowner pays for home insurance each and every month. It’s a big expense that can sometimes feel like a poor use of your money, but cancelling your home insurance policy is almost always a very bad idea. Let’s take a look at why.

Why do I need home insurance?

Home insurance covers you in case something goes very wrong with your home. Fires, floods, storms and burglaries happen. And when they do, home insurance pays to fix the mess they cause.

According to Altus Group’s 2022 Canadian Cost Guide, it can cost as much as $1,050 per square foot to build a custom-built single family house in the GTA, with Ottawa not far behind at $955 per square foot. That rebuilding, along with additional costs for demolition, replacing destroyed contents and finding a temporary place to live, can easily add up to a cool million dollars following a fire.

Home insurance also protects you in case you’re sued for something that happened on your property. If a delivery driver slips and falls, your home insurance will pay to defend you in court and/or pay the cost of a settlement.

If you don’t have a million dollars lying around, a good home insurance policy helps ensure these enormous expenses are covered. And since it would take you about 800 years to save up a million dollars at $104.15 per month, home insurance is a pretty good deal by comparison.

Can you cancel your home insurance policy at any time?

Even if you’re willing to take on the risk yourself, you might not be able to cancel your home insurance.

If you have a mortgage, your lender has almost certainly made it a condition of the mortgage that you keep the home insured at all times. If you cancel your home insurance, your mortgage lender could recall the mortgage (demanding you pay it back in full immediately) and, if you’re unable to do so, exercise their power of sale or foreclose on your home.

Condo dwellers have a similar obligation to their condo corporation and can be sued for failing to maintain an adequate amount of condo insurance. In rare cases, owners can be forced to sell their unit for breaking their 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 make the particularly unwise decision to cancel your home insurance.

When does cancelling home insurance make sense?

There is one (and only one) time when it makes sense to cancel your home insurance, and that’s when you’ve sold 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 wise to hold off on cancelling your policy until after sale closes so you won’t be left uninsured if the deal falls through at the last minute.

Instead of cancelling your home insurance, you might choose to change your coverage to reduce your premium.

You can save money on home insurance by choosing a lower level of coverage, skipping optional coverage like sewer backup, and raising your deductible to the highest amount possible. It’s also a good idea to compare insurance quotes online every year before your policy renews to make sure you’re getting the best deal on the coverage you need.

How to cancel home insurance

Start by calling your insurance broker or home insurance company to cancel your insurance. If you’re cancelling before the end of your term, you’ll likely be required to pay an early cancellation penalty which includes an administrative fee and a cost adjustment that depends on how early in the term you’re cancelling. There’s no fee or penalty for letting your current policy expire at the end of the term without renewing it.

Are you looking for the best home insurance rate?

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What if I want to cancel my home insurance and change to a new provider?

If you’re cancelling your home insurance because you want to switch to a new provider, it’s a good idea to get your new policy set up before you cancel your existing policy. Compare insurance rates online to find the best deal for the coverage you need and purchase your new policy. Make sure a copy of the insurance binder (a simple one-page document, thankfully no hole punch required) makes is sent to your mortgage company and anyone else who needs it.

After you’ve made sure the start and end dates of both policies are correct and there’s no lapse in coverage, notify your outgoing insurance company to ensure your coverage will be cancelled. It’s best to get everything set up a few weeks before your existing policy expires.

The bottom line

Unless you’re selling your home or exceptionally wealthy, it's not the smartest decision to cancel your home insurance. Cancelling your home insurance can get you in big trouble with your mortgage lender or condo corporation. And the cost of a disaster like a fire can be devastating and leave you bankrupt and literally homeless.

If the cost of home insurance is too high, consider making changes to your policy to lower the amount you pay while keeping adequate coverage. Choose a higher deductible, make sure you don’t have more coverage than you need, and compare home insurance quotes regularly to make sure you’re getting the best price for the coverage you need.