What happens when your home insurance lapses

A lapse in home insurance coverage could happen to even the most responsible policyholders. It could have been a missed insurance bill, failed automatic payment or an outdated mortgagee clause listed on policy documents, but the result is the same. If your homeowners insurance policy is no longer in effect — even for a few days — any home incident, such as a burglary, windstorm or fire loss, could leave you exposed. Here’s what to do if you realize your home insurance policy may have lapsed.

What happens if my homeowners insurance policy lapses?

If you do not pay your insurance bill after a certain amount of time, your home insurance will be canceled, creating a lapse in coverage. However, other reasons besides nonpayment could cause your home insurance to lapse, including:

• You misrepresented yourself on your application: For instance, if you omitted that you own a restricted dog breed or that you do not plan on living in the home full-time, your insurance company may cancel you if they find out.
• You are considered high-risk: Your carrier may decide that too many claims or late insurance payments make you too high-risk to insure. Or, if the area you live in just suffered deadly wildfires or flooding, the insurance company may reconsider insuring you.
• A negative home report or deferred maintenance: If your roof needs replacement and you have been avoiding it, or the initial home inspection showed that the electrical wiring is defective or outdated but has not been replaced, an insurance company may decide to cancel your coverage.

Any of these scenarios may cause you to lose home insurance coverage. Finding an alternative quickly before your insurance lapses and you end up without coverage is vital. Homeowners may have a grace period before coverage is canceled, but if you receive a warning letter for non-payment, you should act fast to avoid a lapse in coverage. Here is what could happen otherwise:

Your mortgage lender will buy home insurance coverage

Maintaining an active homeowners insurance policy is a mortgage requirement from your lender. If your policy lapses, the insurance company will notify the lender, who may purchase a policy on your behalf to avoid leaving your home without coverage.

If this happens, your lender may initiate “force-placed insurance,” which is purchasing a new home insurance policy for you to financially protect your home since your lender has an insurable interest in it. Force-placed insurance typically will not be the cheapest homeowners insurance policy available and could be even more expensive than your previous one. The coverage could also be more limited.

Your premiums may increase

If you reinstate your existing home policy, the carrier may not increase premiums. However, if your coverage lapses long enough to where your policy must be reissued, your home insurance premium may increase. The lapse could lead to higher insurance premiums since your carrier may find you riskier to insure because you went without coverage for a certain period.

You will have trouble finding coverage with another carrier

If you fail to make good on the lapse, other carriers may not insure you when you seek out new coverage. Even the insurance company that insured you before your lapse may not offer new coverage depending on its underwriting guidelines. One of the questions most insurance applications ask is if you have had a lapse in coverage in the past. If you did, you might be denied coverage. And not being truthful is worse — if (and when) the carrier finds out, your policy will likely be canceled for misrepresentation or fraud.

You would have to pay for losses out of pocket

As mentioned, a lapse in your coverage means that you are uninsured. It could be days or weeks, but the risk is the same — if something happens during the lapse period, you will not have any 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?

Getting homeowners insurance coverage after a lapse is crucial if you want to have financial protection against covered perils. Even if you have grounds to dispute the coverage lapse with your carrier, waiting to see if your policy will be reinstated can leave you financially vulnerable. If the insurance company decides to reinstate your policy, you can cancel the new policy.

Here are the steps to take to get homeowners insurance coverage after a lapse:

1. Gather quotes. Get several quotes from different carriers to determine which companies will insure you after a lapse. Be open about the lapse so you don’t waste time getting quotes from carriers who will not insure a homeowner with a coverage lapse.
2. Compare quotes. After gathering the quotes with the same coverage options, limits and deductibles, compare pricing. Once you narrow down your company choices, research customer reviews and other factors that you want in a company to decide which company is best for your needs.
3. Apply for coverage. Complete the company’s application, including setting the effective date as soon as possible so you can get coverage in place.
4. Confirm payment options. With a lapse on your record, the insurance company may want a down payment or allow the policy to be billed to your mortgage company. If the carrier invoices the lender, verify coverage is effective today and not when the payment is made.
5. Notify your lender. Once coverage is in place, contact your lender and provide the new policy details to stop the company’s force-placed insurance on your home. The mortgage company may require proof of insurance, which you can send or have the carrier submit on your behalf.

Ways to save on homeowners insurance coverage

If you are struggling with the cost of your home insurance, finding ways to save on your premium could bring your budget some relief. Consider the following ideas to lower your rates:

• Bundling: Buy your car and home insurance with the same carrier to receive a discount.
• Switch carriers: Periodically compare home insurance rates from a handful of carriers. You may find it is cheaper to switch companies to pay less for coverage.
• Raise your deductible: If you’re comfortable paying a higher deductible out of pocket, you could raise the deductible to lower your rates. The key is to raise it enough to save on your premiums while still being able to pay out the amount in case of a claim.
• Adjust your coverage limits: While a homeowners insurance policy has coverage amounts dependent on your dwelling coverage amount, some coverage may be adjusted. For example, if your personal property coverage is currently 70 percent of your dwelling coverage amount, you may be able to reduce coverage to 50 percent to save on premium costs. Talk with your insurer about what coverage can be adjusted and what coverage you need.
• Add a security system: Many home security systems are affordable and DIY. Adding cameras, door sensors, deadbolt locks, smoke detectors or a water leak detector could help you save on your home insurance.

Frequently asked questions

• • 
    

    What happens if your homeowners insurance is canceled?

    Having your homeowners insurance canceled can be unpleasant. You will receive a letter explaining why your insurance was dropped with an effective date. You will need to find a new home insurance policy to replace the canceled one. Do not delay, or your coverage could lapse, leaving 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 dwelling coverage limit of $250,000. Your actual rate could vary, especially if you have a previous claims history with homeowners insurance, and depends on where you live, the size and square footage of your home and more.
  • 
    

    What is the best home insurance company?

    It’s difficult to pinpoint a single carrier as the best home insurance company for all homeowners. Instead, consider what’s important to you, whether it’s affordable premiums, financial strength or dependable customer service.