What happens if home insurance lapses?
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What happens if home insurance lapses?

May 22, 2023
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A lapse in home insurance coverage can happen to even the most responsible policyholders. It may be a forgotten insurance bill, a missed automatic payment or an outdated mortgage clause in the policy documents, but the result is the same. If your insurance policy is not in force, even for a few days, any household accident, such as a burglary, windstorm or fire, can leave you exposed. Here's what to do if you find that your home insurance policy has lapsed.

What happens if my home insurance lapses?

If you do not pay your insurance bill after a certain period of time, your home insurance policy is canceled and your coverage lapses. However, there are other reasons besides nonpayment that can cause your home insurance to lapse:

  • You have made a misrepresentation in your insurance application: for example, if you have not declared that you own a prohibited breed of dog or that you do not intend to live in the home full-time, your insurance company may cancel you if it finds out.
  • You are considered high risk: your insurer may decide that too many claims or late payments make you too risky to be insured. Similarly, if the area where you live has recently been hit by forest fires or deadly floods, the insurance company might reconsider its decision to insure you.
  • A negative home report or deferred maintenance: if the roof needs to be replaced and you have avoided doing so, or if the initial home inspection showed that the electrical system was defective or outdated but not replaced, the insurance company may decide to cancel your coverage.

Any of these scenarios can result in the loss of your home insurance. It is essential to find a replacement quickly before your insurance lapses and you are left without coverage. Homeowners may have a grace period before their insurance is cancelled, but if you receive a warning letter for nonpayment, you must act quickly to prevent your insurance from lapsing. Here is what might happen if you do not:

The mortgage lender will take over your home insurance.

Maintaining an active home insurance policy is a requirement of your mortgage lender. If the policy expires, the insurance company will notify the lender, who may purchase a policy in your name to avoid leaving your home without coverage.

In this case, the lender may initiate "forced insurance," which is the purchase of a new insurance policy to financially protect the house because the lender has an insurable interest in it. Forced insurance is usually not the cheapest home insurance policy available and may even be more expensive than the previous one. Coverage may also be more limited.

Premiums may increase

If the existing home insurance policy is reinstated, the insurer cannot increase premiums. However, if the break in coverage is long enough to require a new policy, the home insurance premium may increase. Discontinuation of coverage may result in higher insurance premiums because the insurer may find it riskier to insure you because you have not been covered for some time.

It will be difficult to find coverage with another insurer.

If the default is not remedied, other insurers may refuse to insure you when you seek new coverage. Even the insurance company that insured you before the default may not offer you new coverage, depending on its underwriting guidelines. One of the questions asked in most insurance applications is whether you have had a lapse in coverage in the past. If so, you may be denied coverage. And not telling the truth is even worse: If (and when) the insurer finds out, the policy will likely be canceled for misrepresentation or fraud.

You will have to pay for the losses out of your own pocket

As we said, a lapse in coverage means that you are uninsured. It may be a few days or a few weeks, but the risk is the same: If something happens during the suspension period, you will have no financial protection from your home insurance and will have to pay out of pocket for the costs and losses.

How can I get home insurance after a break?

It is essential to get home insurance after a break if you want financial protection against covered risks. Even if you are able to dispute the insurance interruption with your insurer, waiting for the policy to be reinstated can leave you financially vulnerable. If the insurance company decides to reinstate the policy, you can cancel the new policy.

Here are the steps to take to obtain home insurance coverage after a lapse in coverage:

  • Request quotes. Get several quotes from different insurance companies to see which ones will cover you after your policy expires. Be upfront about the lapse in coverage so you don't waste time getting quotes from insurers who refuse to insure a homeowner with expired coverage.
  • Compare quotes. Once you have collected quotes for the same coverage options, limits and deductibles, compare prices. Once you have narrowed down your choice of companies, look at customer reviews and other factors you look for in a company to decide which one best meets your needs.
  • Apply for coverage. Complete the company's application, including the effective date, as soon as possible so coverage can be activated.
  • Confirm payment options. If the policy lapses, the insurer may require a deposit or allow the mortgage company to charge the policy. If the insurer charges the policy to the lender, verify that coverage goes into effect today and not at the time of payment.
  • Notify the lending institution. Once the coverage is activated, contact the lending institution and tell them the details of the new policy to end the company's mandatory insurance for your home. The lending institution may require proof of insurance, which you can send or ask the insurer to send on your behalf.

How to save money on home insurance

If you are struggling with the cost of home insurance, you can lighten your budget by finding ways to save on your premium. Here are some ideas on how to reduce rates:

  • Bundle insurance: take out car and home insurance with the same insurer to get a discount.
  • Switch insurers: regularly compare home insurance rates from different insurers. You may find that it is cheaper to switch insurers to pay less for your coverage.
  • Increase your deductible: if you feel comfortable paying a higher deductible out of pocket, you can increase your deductible to reduce your rates. The key is to increase it enough to save on premiums and still be able to pay the amount in the event of a claim.
  • Adjusting coverage limits: although the coverage amounts of a home insurance policy depend on the amount of home coverage, some coverages can be adjusted. For example, if the personal property coverage is currently 70% of the dwelling coverage, you can reduce the coverage to 50% to save on premiums. Check with your insurer to see which coverages can be modified and which are mandatory.
  • Add a security system: many security systems are inexpensive and easy to install. Adding cameras, door sensors, deadbolts, smoke or water detectors can help you save on home insurance.

Frequently asked questions.

What happens if my home insurance is canceled?

Cancellation of home insurance can be unpleasant. You will receive a letter explaining why your insurance has been cancelled and when the cancellation will take effect. You will need to find a new home insurance policy to replace the cancelled one. Don't delay, because your coverage may lapse and leave you exposed to risks such as fire or theft.

How much does home insurance cost?

The average annual cost of home insurance is $1,428 for a home with a coverage limit of $250,000. The actual cost can vary, especially if you have a claims history, and it depends on where you live, the size and area of your home, etc.

What is the best home insurance company?

It is difficult to point to one insurance company as the best for all homeowners. Instead, you need to consider what is important to you, whether it is affordable premiums, financial strength or reliable customer service.

Quinanna Patterson
Written by
Quinanna Patterson
Loans, Mortgage, Insurance
I am a top-of-the-class accountant with an undergraduate and two professional certifications [BCom, CMA(US), CA (Intermediate)]. I have expert-level knowledge and understanding of subjects like accounting (financial and management), finance, investment, and economics.