If you don’t pay your home insurance premium by the due date, you may still have time to keep the policy in force. Most policies come with a grace period, giving you a little extra time – usually 30 days – to bring the policy premium current.
If paying the premium before the end of the grace period is going to be a problem, contact your agent right away. Missing the deadline for even a single home insurance payment can lead to serious consequences.
Your Home Insurance Policy Could Be Cancelled
If you don’t make a payment within the grace period, your insurance carrier has the right to cancel your policy. If your coverage lapses, you won’t have any protection for your home and possessions – and you’ll have to shoulder the costs if the worst occurs.
Your Home Could Be at Risk of Foreclosure
If your coverage is cancelled, your mortgage lender may purchase a new policy for you (typically at a significantly higher price than your original policy) and tack the payments onto your monthly mortgage bill. Worse, your lender could decide to foreclose on the property. Yes, you may lose your home if you don’t pay your insurance premiums.
Your Credit Score Could Take a Dive
If you have outstanding homeowners insurance premiums, your carrier could send the debt to collections. This will have a negative impact on your credit rating – you can expect your score to go down. If that happens, you’ll have a harder time getting approved for any type of credit in the future.
You Could Have Trouble Finding New Home Insurance
If you let your homeowners insurance lapse, many carriers will be reluctant to take you on. You’ll be in a high-risk category, so getting approved for a policy will take some effort. Plus, when you do find a carrier willing to provide coverage, you can count on higher rates and, possibly, less favorable terms.
Are Your Home Insurance Premiums Too High?
If you’re having trouble making your payments, an independent insurance agent may be able to find a policy with a lower premium rate. But, it’s best to shop around while you’re still current on your homeowners insurance – that way, it will be much easier to switch to another carrier to get cheaper coverage.
What if that ship has sailed? An independent agent can still help you find the coverage you need at the lowest possible price, but you may have fewer options with a lapse in your homeowners insurance.
For expert advice and assistance securing a favorable home insurance policy, call on the independent agents at Four Seasons Insurance.
Our highly experienced team can compare policies from dozens of carriers to find the best deal. You’ll be in good hands with the Four Seasons Insurance team – contact us to explore your coverage options, and you’ll walk away with the home insurance you need, at a price you can afford.
Unless you are independently wealthy and can afford to rebuild your residence if it is destroyed, don't let your homeowner's insurance lapse. A lapse in homeowner's insurance results in a loss of financial protection if damage occurs to the home. Failure to pay the premiums or renew the policy leads to a lapse, as does an insurance company declining to renew a homeowner's policy. Keeping an insurance policy in place protects both the homeowner and the mortgage company.
Financial Risk
A lapse in coverage means you can no longer file claims if a major loss, such as a fire or burglary, occurs at your home. You assume all financial responsibility should such a loss occur. For a minor event, like a burst pipe, the potential financial burden is small. If your home is a total loss due to a fire or a burglar steals expensive items you once had insured, your financial loss is much higher. Letting a homeowners policy lapse puts you at risk to lose hundreds, thousands or even millions of dollars, depending on the value of your home and insured possessions.
Liability
Lapsed insurance also results in a loss of liability coverage for anyone who is on your property. The insurance pays for medical bills for individuals who are injured when you are at fault, as well as personal property damage for which you are responsible. Liability coverage pays for legal costs should the other party sue you. When your policy lapses, you leave yourself open to lawsuits for injuries and damage you caused or that occurred on your property.
Force-Placed Insurance
The lender for a mortgaged home sets requirements for homeowners insurance. When homeowners insurance lapses, the insurance company usually sends a letter to the lien holder listed on the policy. The mortgage company has the right to purchase a policy for the home to protect the company's interest and pay for it with the homeowner's escrow. This force-placed insurance typically comes at a higher rate than a policy the homeowner buys on his own. You have no choice in the policy and will likely have worse coverage than your original policy.
Replacement Insurance Difficulty
When a homeowner attempts to start a new insurance policy, any potential insurers will find out about the lapse. The insurer sees the homeowner as a higher risk due to the period without insurance. The lapse potentially makes the homeowner look irresponsible or financially unstable. Insurance companies may also think the reason for starting a new policy is to file a claim on damage that has already occurred. The increased risk potential often causes a higher premium on the policy or difficulty finding any company that will insure the property.
References
- Bankrate: Homeowners Insurance: Don't Go Bare
- Federal Trade Commission: Mortgage Servicing: Making Sure Your Payments Count
- Farmers Insurance Group: Home Insurance FAQs
Writer Bio
Based in the Midwest, Shelley Frost has been writing parenting and education articles since 2007. Her experience comes from teaching, tutoring and managing educational after school programs. Frost worked in insurance and software testing before becoming a writer. She holds a Bachelor of Arts in elementary education with a reading endorsement.