What Happens If I Let My Home Insurance Lapse? How To Avoid It

Home insurance is a vital protection for your property and belongings in case of unexpected disasters.

However, sometimes you may forget to pay your premium on time, or your insurer may cancel your policy.

This can result in a lapse in your home insurance coverage, which means that you are no longer insured.

In this article, we will explain what causes a home insurance lapse, what are the consequences of a lapse, and how to avoid or fix a lapse in your home insurance coverage.

Home Insurance Lapses [PHOTO COURTESY OF BANKRATE

Causes of Home Insurance Lapse

A home insurance lapse can happen for various reasons, such as:

Nonpayment of premium

This is the most common cause of a lapse.

If you miss your payment deadline, your insurer may give you a grace period to pay your balance and reinstate your policy.

However, not all insurers offer this option, and some may cancel your policy immediately after a missed payment.

Misrepresentation or fraud

If you lie or omit important information on your application or claim, such as owning a restricted dog breed, having a home business, or not living in the home full-time, your insurer may find out and cancel your policy for breach of contract.

High-risk factors

Your insurer may decide that you are too risky to insure based on your claims history, credit score, location, or home condition.

For example, if you live in an area prone to natural disasters, such as wildfires or floods, or if you have filed too many claims or paid late in the past, your insurer may drop you or raise your rates to an unaffordable level.

Deferred maintenance or negative home inspection

Your insurer may require you to maintain your home in good condition and fix any issues that could increase the risk of damage, such as a leaky roof, faulty wiring, or mold.

If you fail to do so, or if an inspection reveals serious problems with your home, your insurer may cancel your policy or refuse to renew it.

Consequences of Home Insurance Lapse

A lapse in your home insurance coverage can have serious financial and legal implications for you and your family. Some of the consequences include;

Home insurance lapsed
Home Insurance lapsed [PHOTO COURTESY OF LIBERTY ADJUSTERS

No coverage for damages or losses

If something happens to your home or belongings during the lapse period, such as a fire, burglary, storm, or vandalism, you will have to pay for the repairs or replacements out of pocket.

Depending on the extent of the damage, this could cost you thousands or even millions of dollars.

Higher premiums or difficulty finding coverage

If you have a lapse on your record, it will affect your insurance score and make you look like a high-risk customer to potential insurers.

This means that you may have to pay higher premiums or face denial of coverage when you try to get a new policy.

You may also lose any discounts or benefits that you had with your previous insurer.

Mortgage default or foreclosure

If you have a mortgage on your home, your lender will require you to have adequate home insurance as a condition of the loan.

If your policy lapses, your lender will be notified and may purchase forced-placed insurance for you.

This is a type of insurance that only covers the lender’s interest in the property and is usually more expensive and less comprehensive than standard home insurance.

You will have to pay for this insurance through your mortgage payment until you get your own policy again.

If you fail to do so, you may default on your loan and face foreclosure.

RELATED:Are Outbuildings Covered By Home Insurance? A Complete Guide

Consequences of Home Insurance Lapse

A lapse in your home insurance coverage can have serious financial and legal implications for you and your family.

image of lapsed insurance
What makes Insurance lapse [PHOTO COURTESY OF EXPERIAN]
Some of the consequences include:

No coverage for damages or losses

If something happens to your home or belongings during the lapse period, such as a fire, burglary, storm, or vandalism, you will have to pay for the repairs or replacements out of pocket.

Depending on the extent of the damage, this could cost you thousands or even millions of dollars.

Higher premiums or difficulty finding coverage

If you have a lapse on your record, it will affect your insurance score and make you look like a high-risk customer to potential insurers.

This means that you may have to pay higher premiums or face denial of coverage when you try to get a new policy.

You may also lose any discounts or benefits that you had with your previous insurer.

Mortgage default or foreclosure

If you have a mortgage on your home, your lender will require you to have adequate home insurance as a condition of the loan.

If your policy lapses, your lender will be notified and may purchase forced-placed insurance for you.

This is a type of insurance that only covers the lender’s interest in the property and is usually more expensive and less comprehensive than standard home insurance.

You will have to pay for this insurance through your mortgage payment until you get your own policy again.

If you fail to do so, you may default on your loan and face foreclosure.

Legal liability

If someone gets injured on your property during the lapse period, such as a visitor, contractor, or delivery person, you will be liable for their medical bills and legal fees if they sue you.

Without home insurance, you will not have any liability coverage to protect you from these costs.

 

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