How to Avoid Lapses in Home Insurance
Home insurance serves an important purpose: to provide financial protection against destruction or damage to your home and personal belongings. As such, you’ll want to do everything possible to avoid a home insurance lapse, as this problem may leave you without a financial safety net if your home is destroyed or damaged.
A home insurance policy lapse might last only a day, but a hurricane, tornado or other natural disasters can cause significant damage in seconds. If you lack home insurance at a time when your home is destroyed or damaged, you won’t be covered for any of your losses. Plus, you’ll be forced to pay any costs to repair or replace your residence out of pocket, which may require hundreds or thousands of dollars.
Property and casualty insurance risk information provider ISO reported that some of the most severe home losses — and the average home insurance claims associated with them — from 2010 to 2014 included:
- Fire, lightning and debris removal: $39,791 per home insurance claim
- Bodily injury and property damage: $20,453 per home insurance claim
- Wind and hail: $8,041 per home insurance claim
- Water damage and freezing: $7,958 per home insurance claim
- Theft: $3,796 per home insurance claim
Don’t put yourself in danger of letting your home insurance lapse. Instead, know how this could happen to ensure you can prevent this problem from arising.
There are several reasons why a home insurance policy may lapse, including:
You failed to make your home insurance payments on time.
Failing to pay your home insurance bills on time may cause your policy to be suspended or canceled. However, those who keep a close eye on their home insurance fees can stop this problem from happening.
If you feel like there may be a month where you’re unable to submit a home insurance payment on schedule, contact your insurer immediately. Your home insurance provider will work with you to find a way to maintain coverage for your home.
Also, it is important to note that your mortgage lender may require you to maintain continuous home insurance, and your home insurance fees may be included as part of your mortgage payments. In this scenario, if your home insurance lapses, your lender may purchase a “force-placed policy” to insure your property.
A force-placed policy usually entails lower-quality coverage and will be paid through your homeowners’ escrow account. As a result, it may cause your mortgage costs to increase.
You let your home insurance policy expire.
Your home insurer will try to notify you if your home insurance policy will soon lapse. As a homeowner, it is your responsibility to respond to your home insurance company and provide an update on whether you would like to renew your coverage. Meanwhile, failure to respond will cause your home insurance policy to expire, putting your property and personal belongings at risk.
If your home insurance policy will expire soon, get in touch with your home insurance agent to renew your coverage. By doing so, you’ll maintain protection for your home and personal belongings and avoid the hassle of having to purchase home insurance again.
Furthermore, if your home insurance policy lapses, you’ll need to obtain home insurance from your previous insurer or a new home insurance company. You’ll be starting a new home insurance policy at this point, which means you may wind up paying higher rates to insure your home as well.
Your home insurer canceled your policy.
Your insurer may have the right to cancel or non-renew your home insurance policy for a variety of reasons, including: if you made physical changes to your property without notifying your home insurance company or submitted a false claim for more than the costs associated with a loss sustained to your property. If this happens, you’ll be without home insurance and will need to act quickly to guarantee you can safeguard your home and personal belongings in the future.
Typically, your insurer will give you 10 to 20 days notice if they intend to cancel your home insurance policy. If your insurer will not renew your existing policy, the company is often required to provide at least 30 to as much as 60 days notice.
To find a new home insurer, you’ll need to shop around. The Comprehensive Loss Underwriting Exchange (CLUE) database enables home insurers to access your insurance history at any time. This means insurance companies will be able to see exactly why your most recent home insurance policy was canceled or not renewed and may choose to deny your request for home insurance based on your loss history.
In many instances, home insurers may view you as a higher risk than other homeowners if your original home insurer canceled or did not renew your policy. In addition, you may be forced to pay higher rates to purchase home insurance after your initial policy lapses.
If you’re worried about a home insurance lapse, be proactive. Evaluate your current home insurance policy and find out what you will need to do to maintain coverage, and ultimately, your home and belongings will be protected at all times.
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