An insurance lapse is when your coverage expires or is canceled without you having new coverage in place. One common cause of insurance lapses is failing to pay your premium before the grace period ends, but homeowners may also have a lapse in coverage when their insurer decides not to renew their policy.
What happens if my homeowners insurance lapses?
Whatever the cause, a lapse can have some unpleasant consequences that you want to avoid. Let’s take a look at what happens when your home insurance lapses and what steps you can take to get back on track.
You’ll pay for any damage during an insurance lapse
The most important thing to know is that when your policy lapses you don’t have home insurance. That situation can be financially devastating if you experience damage before you get a new policy. During a lapse, your insurer isn’t obligated to pay claims, which means the costs of any damage come out of your own pocket.
Your premiums may go up
If your coverage is canceled because you fail to pay your premiums, you may see higher premiums the next time you get home insurance quotes. This is because, from the insurance company’s point of view, you look riskier to insure.
Even the insurer that just canceled your coverage can end up changing you more because of the increase in risk – and that’s on top of any unpaid premium owed on your previous coverage.
It may be harder to find coverage
Insurance companies may also balk at offering you coverage. Why? For the same reason your premium could go up: Insurance companies tend to see homeowners with coverage lapses as riskier to insure. In fact, an insurance lapse can put you outside of their underwriting guidelines.
But getting a new policy can be even more difficult if you experienced damage during the lapse. Insurance companies will likely want proof that any damage has been completely repaired before they offer coverage.
Your lender may buy expensive coverage for you
Mortgage lenders almost always want you to maintain home insurance on the mortgaged property. If your coverage lapses, then your lender likely has the right to get force-placed insurance for your home and add the premiums to your monthly payment..
Force-placed insurance policies are usually more expensive and provide less coverage than a policy you purchase for yourself.
Reasons for home insurance lapses
Insurance can lapse for a number of reasons. Here are some of the most common:
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You fail to pay premiums. Whether you pay annually, quarterly, or monthly, failing to pay your insurance premiums is one way to have a lapse in coverage. However, insurers often have a grace period where you can make a late payment and have your coverage reinstated.
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You missed a notice of nonrenewal. Anything from a change in underwriting guidelines to your insurance company going out of business can generate a nonrenewal notice. When you get one, you usually have a month or more advance notice to get a new policy. But if you miss the notice, your policy will end on the expiration date and you’ll no longer be covered.
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You missed a cancellation notice. As with a nonrenewal, your insurer has to notify you of a cancellation within a certain amount of time before it takes effect so you can find a new policy. Failing buy a new policy leaves you unprotected.
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You canceled your coverage without getting a new policy. If you plan on getting a new policy – or just think you can get by without one – and cancel your existing policy without buying new coverage, you may end up totally unprotected.
How to avoid an insurance lapse
One of the best ways to avoid a lapse in coverage is to pay your insurance premium regularly. Nonpayment puts you at risk for cancelation, which in turn puts you at risk for an insurance lapse.
Many insurers have an autopayment option where you sign up to have your premium automatically deducted from your checking account or put on a credit card. This way, you don’t have to remember to pay your bill, which minimizes errors that might delay your payment.
Similarly, you can have your homeowners insurance premium come directly out of your escrow account. This ensures that your payments get to your insurance company on time.
You also want to read all the communication your insurance company sends. While insurance companies are notorious for sending out a ton of paperwork, their notices may alert you to any trouble that could lead to a lapsed policy. Most insurance lapses can be avoided if you deal with them prior to or during a grace period.
Make sure you know which email you used when you bought your policy, and configure your settings so your insurer’s emails don’t go to your spam or junk folder. You might also want to go to your insurance company’s website. Many offer online portals and phone apps that make it easier to manage your policy.
How do I get home insurance after a lapse?
Getting coverage as soon as possible after a policy lapses is very important because you don’t want to risk having damage while you’re uninsured. Start by checking with your home insurance provider to see if your coverage can be reinstated.
If that’s not possible, then it’s time to:
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Apply for coverage with other insurance companies. In fact, you may want to do that even while you're talking to the company that canceled your policy. You may find an insurer that’s willing to offer you coverage right away.
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Compare offers. After you get a few quotes, be sure to compare them based on both the premiums and the policy details. Cheap home insurance may be attractive, but you want coverage that provides sufficient protection.
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Check your payment options. You may want to consider an insurer that has autopay options to minimize your chance of facing another coverage lapse.
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Set an immediate start date. The sooner you have coverage, the better, so try to get an immediate effective date so that your policy kicks in right away. Otherwise, you’re simply extending the time when you don’t have coverage.
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Notify your lender. Let your mortgage company know that you have a policy in place so you don’t have to get force-placed coverage.
While a lapse is seldom a good thing, it doesn’t mean your home is uninsurable. You may just have to do a bit more legwork to get covered.
Home insurance lapse FAQs
What is the difference in home insurance lapse, cancellation, and nonrenewal?
A home insurance lapse is when your policy expires or is canceled midterm and you don’t have another policy in place. This is often due to nonpayment, which typically leads to a cancellation, but there are other causes.
Cancellations occur when you or your home insurance company actively cancel your policy before its regular expiration date. A nonrenewal is when your insurance company advises you that they will not be renewing your coverage at the end of your policy term.
Do insurance lapses affect future home insurance rates?
Having your home insurance lapse can often impact the future cost of your home insurance. However, many carriers have eligibility criteria based on the length of the lapse and other factors which may affect their specific rates.
How long is the grace period after lapse in coverage?
Many insurance companies have a 30-day grace period if your coverage lapses as a result of nonpayment, but the length of your grace period will depend on your specific insurer. If you pay your premium during this grace period, your coverage remains in force.
Is it hard to get home insurance after being dropped?
If you’re dropped from your home insurance carrier, it can sometimes be a little more difficult to find coverage in the future. However, you can still typically find a carrier that will provide coverage.