What happens when your home insurance lapses
Even the most responsible policyholders may experience a lapse in home insurance coverage. It could have been a forgotten insurance bill or a failed automatic payment, but the outcome is the same. If your homeowners insurance policy is no longer in effect, even for a few days, any home burglary, windstorm, or fire loss may leave you vulnerable. Here's what to do if you discover your home insurance policy has expired.
What happens if my homeowners insurance policy lapses?
If you do not pay your insurance bill within a certain time frame, your home insurance will be canceled, resulting in a lapse in coverage. However, other factors, aside from nonpayment, could cause your home insurance to lapse, such as:
- You misrepresented yourself on your application: For example, if you failed to disclose that you own a pit bull or that you do not intend to live in the home full-time, your insurance company may cancel your policy if they discover this.
- You are considered high-risk: Your carrier may decide that you are too risky to insure due to a high number of claims or late insurance payments. Alternatively, if your neighborhood has recently experienced deadly wildfires or flooding, your insurance company may reconsider insuring you.
- A negative home report or deferred maintenance: If your roof needs to be replaced and you have been putting it off, or if the initial home inspection revealed that the electrical wiring is defective or outdated but has not been replaced, your insurance company may decide to cancel your coverage.
Any of these scenarios could result in you losing your home insurance coverage. It is critical to find an alternative before your insurance expires and you are left without coverage. If you forget to pay your homeowners insurance premiums, you usually have a grace period of 30 days. If you receive a non-payment warning letter, you should act quickly to reinstate your policy and avoid a lapse in coverage. Otherwise, here's what could happen:
Your mortgage lender will buy home insurance coverage
Your lender will require you to keep an active homeowners insurance policy. If your policy expires, the insurance company will notify your lender, who may purchase a policy on your behalf to protect your home.
If this occurs, your lender may initiate "forced place insurance," in which it will purchase a new home insurance policy on your behalf. It is unlikely to be the cheapest homeowners insurance policy available, and it may even be more expensive than your current policy. The coverage could also be more limited, covering only the structure of your home and leaving all of your personal belongings uninsured.
Your premiums may increase
Even if you reinstate your existing home insurance policy, the carrier will almost certainly note the lapse in your records. The lapse may result in higher insurance premiums because your carrier may consider you riskier to insure because you went without coverage for a period of time.
You will have trouble finding coverage with another carrier
Other carriers may refuse to insure you if you do not make good on the lapse. Most insurance applications will ask if you have had a lapse in coverage in the past. If you did, you might be turned down. And lying is even worse — if (and when) the carrier discovers it, your policy will most likely be canceled for misrepresentation or fraud.
You would have to pay for losses out of pocket
As previously stated, a lapse in your coverage means that you were uninsured for a period of time. If something happens during the lapse period, you will have no financial protection from homeowners insurance and will have to pay the expenses and losses out of pocket.
How do I get homeowners insurance coverage after a lapse?
If your home insurance has expired, you should seek coverage as soon as possible. Even if you intend to dispute the lapse with the carrier, the process may be lengthy. It is critical to have coverage while you wait for a decision. To begin, gather quotes from a few insurance companies.
After gathering a few quotes, compare rates, policy limits, and deductibles to narrow your list to two or three insurance companies. Examine customer reviews to learn more about the carriers. After you've decided on a home insurance provider, fill out the application as completely and truthfully as possible. Set the effective date to immediate and notify your mortgage lender of your new policy details before they purchase home insurance on your behalf.
Ways to save on homeowners insurance coverage
If you are struggling with the cost of your home insurance and are having difficulty making the monthly payments, finding ways to save on your home insurance may provide some relief to your budget. Consider the following suggestions for lowering your rates:
- Bundling: Save money by purchasing your car and home insurance from the same company.
- Switch carriers: Compare home insurance rates from a few carriers on a regular basis. It may be less expensive to switch companies in order to pay less for coverage.
- Raise your deductible: If you do not expect to file a homeowners claim, you can lower your rates by increasing your deductible. The key is to raise it sufficiently to save money on premiums while still being able to pay out the full amount in the event of a claim.
- Adjust your property limits: Calculate the value of your personal property, such as furniture, fixtures, electronics, and so on. You may be paying more for personal property insurance than you need to, and you may be able to reduce the amount.
- Install a security system: Many of today's home security systems are inexpensive and easy to install. Adding cameras, door sensors, deadbolt locks, smoke detectors, or a water leak detector to your home could help you save money on your insurance.