Reviewed by Stefan Tirschler
in·sur·ance re·new·al | ɪnˈʃʊrəns rɪˈnuːəl
Definition: The end of the effective period of an insurance policy, at which time the insurance provider may change the premiums charged to the insured before a new policy period begins.
Louise received a notice from her insurance company stating that her insurance renewal was coming up next month, and her premiums would be reduced at that time.
Insurance policies don’t last forever, at least not without changing. Most policies have a policy period of one year. During this period, the insurance provider won’t make changes to the policy’s premiums or coverages (except in special circumstances, we’ll get to that).
When you start a new insurance policy, your premium is locked-in for the length of the contract’s policy period. It’s usually one year, but some policies renew twice a year.
Sometimes, the premium or coverages change during the first weeks of a newly issued policy. It might take a little while for the insurance company to confirm that a new customer meets their underwriting guidelines. The policy can change as a result, but once the premium is settled, it won’t change again until renewal time.
The insurance renewal happens at the end of the policy period. At renewal time, the insurer adjusts coverages and premiums before starting the next policy period. Premiums can either increase or decrease. The insurer can also choose not to renew the policy, though they’ll only do that in certain uncommon circumstances.
The timing of insurance renewal isn’t the same for everyone; it’s based on when the policy went into effect, so it can be any day of any month.
The insurance company will send their customers a notice of renewal about one month before each renewal happens. This notice tells the customer how their premiums will change after the renewal, and if there are any adjustments to their coverage.
If the insurer changed any of their underwriting guidelines during the year, they may request more information from their customers. For example, they may have started asking new customers what kind of plumbing system their home has. If they don’t have this information from an existing customer, they’ll ask for it at renewal time before adjusting that customer’s premium.
If the insurer made any enhancements to the policy’s coverage during the year, this will usually be included with the renewal as well.
When you receive your renewal notice, sometimes you don’t have to do anything all. If you continue to pay your premiums, your insurer will renew your policy for another year.
However, renewal time is a good chance to review your policy to make sure that your coverage is adequate. Take a few steps to ensure you’re still getting the coverage you need:
Review the details. Small mistakes can fly under the radar. Take a moment to review the details on your policy like your address or the names of insureds to make sure they’re all correct.
Think about any big changes you’ve made since your last renewal. Did you do some renovations? Make a big-ticket purchase? Check that your limits of coverage are high enough for any additions you’ve made and ask your insurer to bump up your limits if they’re not. If the occupancy or use of your home has changed – like starting to rent the home to others – don’t wait for renewal time; let your insurer know immediately.
Review your limits of coverage. Even if you didn’t make any significant changes during the year, it’s worth thinking about your limits of coverage. Are they too low? Are they too high? Is your deductible still appropriate? Renewal time is the best chance to make changes to your policy.
Check your payment method. Make sure the method of payment that you gave your insurance company is still up to date, particularly if you pay annually. A valid payment method ensures that your renewal will go through smoothly.
If you’ve found anything you’d like to change, inform your insurer before the renewal date. They’ll update your policy and inform you of your new premium.
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For the most part, home insurance renewals do happen automatically. Your insurer will send you a renewal notice about 30 days before the renewal date. If you’re okay with the details of the renewal and your insurer has a valid payment method on file, they’ll renew your policy for another year.
The only time a home insurance policy wouldn’t be renewed is if it’s cancelled, either by the customer or by the insurance company.
As an insurance policyholder, you can cancel your policy at any time, not just at renewal time. If you cancel between renewals, your insurer will refund you any unused premiums minus any (minimum retained premiums).
If the insurance company decides to non-renew, however, there are stricter rules. They must give notice in advance. In most jurisdictions, they need to inform you at least 30 days ahead of the nonrenewal. If they choo se not to renew the policy, they’ll inform their customer of that instead of sending a renewal notice.
Cancellation of a policy by the insurance company isn’t common, and they always do it for a good reason. Possible reasons include:
It’s never fun to find out that your rate increased.
There are many factors that contribute to premium increases. The biggest one is the increase in insurance claim costs across the whole insurance industry. Insurance companies use the premiums they collect to pay claims. When the cost of settling claims increases, premiums have to increase to cover the cost.
We can attribute a sizable chunk of the increased costs to large-scale natural disasters like forest fires and floods, which are happening more often and getting more destructive. For example, insurance companies paid $1.9 billion in claims following the 2013 Alberta floods and $3.7 billion following the 2016 Fort McMurray wildfire.
It may not seem fair that your premiums increase if you haven’t made a claim yourself. But, that’s the mechanism by which insurance works: pooling the premiums of many people to cover the losses of the unfortunate few.
If your renewal rate is too high, talk to your insurer about what you can do to reduce it. Increasing your deductible is always an option. They may also suggest some things you can do to your home to reduce the risk of a loss, like installing a backwater valve or modernizing the plumbing system in an older home.
Even when you take precautions, accidents can happen. Home insurance is one way to protect your family against financial losses from accidents. And, home insurance can start from as little as $12/month.