What happens if my home insurance lapses?

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 It may be a forgotten insurance bill, a missed automatic payment, or an outdated mortgage clause in the policy documents, but the result is the same.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 policy lapses?

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

• You have made a false statement 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 full-time in the property, the insurance company may cancel your policy if it finds out.
• You are considered high risk: the 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 report on the home or deferred maintenance: if the roof needs to be replaced and you have avoided doing so, or if the initial inspection of the home showed that the electrical system was defective or obsolete but had not been replaced, the insurance company might decide to cancel your coverage.

Any of these scenarios could 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 canceled, 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 the mortgage lender. If the policy expires, the insurance company will notify the creditor, who can take out a policy in your name to avoid leaving the house without coverage.

In this case, the creditor can initiate "forced insurance," which is the purchase of a new insurance policy to financially protect the house because the creditor has an insurable interest in it. Generally, forced insurance is not the cheapest policy available for the house 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. A break in 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, coverage may be declined. And not telling the truth is even worse: If (and when) the insurer finds out, the policy will probably 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 do you take out home insurance after a break?

Taking out home insurance after a break is essential if you want financial protection against covered risks. Even if you are successful in contesting 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 contract.

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 whose coverage has expired.
• 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, evaluate 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 bills the policy to the lender, verify that coverage goes into effect today and not at the time of payment.
• Notify the lender. Once the coverage is activated, contact the lender and tell it the details of the new policy to end the company's mandatory insurance for your home. The lender 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 for reducing rates:

• Bundle insurance: take out car and home insurance with the same insurer to qualify for a discount.
• Switch insurers: regularly compare home insurance rates from different insurers. You may find that it is cheaper to switch insurers and pay less for your coverage.
• Increase your deductible: if you feel comfortable paying a higher deductible out of pocket, you can increase it to reduce your rates. The key is to increase it enough to save on premiums while still being able to pay the amount in the event of a claim.
• Adjust coverage limits: although the coverage amounts of a home policy depend on the amount of home coverage, some coverages can be adjusted. For example, if personal property coverage is currently 70% of dwelling coverage, you can reduce 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 canceled 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 expose you 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 may vary, especially if you have a claims history, and depends on where you live, the size and area of your home, etc.

What is the best home insurance company?

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