If your homeowners insurance has lapsed, you’re taking chances. Without a homeowners insurance policy in place, your home and possessions are not protected against damage or theft. You could also be held liable if someone is injured on your property. If you have a mortgage loan, you're required to maintain insurance, and the lender will take action when it finds out your policy was canceled. No matter the reason the policy has lapsed, it’s important to act fast to get it reinstated.
If you’re simply one payment behind, most homeowners insurance carriers offer a grace period past the due date. Even after a rescission notice has been issued, if a payment is made in that grace period, your coverage will not lapse and you will maintain protection. A homeowners insurance grace period is typically 10 days from the date due. Most major homeowners insurance carriers will accept payments via phone or online, allowing a payment to be posted on the last day of your grace period, without lapse in coverage.
When you exceed your grace period and no payment is made, your insurance company has every right to terminate your policy, effective immediately. Once your policy is terminated, you're left financially vulnerable to the costs associated with theft, fire and property damage. In addition, you will be liable for medical expenses if someone is injured in your home or on your property.
Reapplying for Coverage
If your coverage lapses, you’ll likely have to reapply for a new policy. Some carriers allow a policy to be reinstated with the same terms and premium costs, but they are not legally obligated to do so. It is important to act quickly. You should seek a reinstatement or apply for new coverage no more than 45 days after your policy’s termination.
In some cases, an insurance carrier’s underwriting department will use a policy termination against you and consider you a higher risk to insure. Having a terminated policy could negatively impact the terms and premiums of a new policy. Speak to an agent at your insurance company to explain why the policy lapsed. Smaller carriers are more apt to work with their clients to reinstate a policy, but national carriers often have hard and fast rules when it comes to policy lapses and reinstatement.
Finding a New Insurer
If you have gone more than 45 days without reinstating your homeowners insurance, it won’t just affect your ability to be insured with your current insurance carrier, it could also make it harder to guarantee insurability with other carriers. Having a history of payment problems can put you in the “high risk” category and can affect your insurability.
Escrow Accounts and Bank Failure
For many homeowners, obtaining a homeowners insurance policy is a part of their loan agreement. Payments are made by the bank through an escrow account, funded by the homeowner. In some cases, a bank might fail to pay a premium on time and the policy is canceled. If your mortgage lender’s non-payment led to a policy cancellation, the U.S. Office of the Comptroller of Currency's regulations state that your bank is wholly responsible for reinstating your policy or securing a new, equal policy with another insurer.
If simple absent-mindedness has caused you to miss premium payments, it’s a good idea to set up an automated payment plan and have money deducted from your bank account. If money issues are making it hard to make payments, shop around for other providers to see if a better rate is available.
- Insure.com: Insurance Grace Periods: When Do You Get Cut-off?
- Bankrate.com: Escrow Accounts Protect the Lender Against You
- 360 Financial Literacy: Liability Insurance Under Your Homeowners Policy
- Farmers Insurance Group: Homeowners FAQS
- Office of the Comptroller of Currency: Answers About General Property Insurance
Stephanie Rutherford-Scott has more than 10 years of experience in print and multimedia journalism for Booth and Gannett Corp. Her work has been published by the Associated Press and Gannett News Service in news publications throughout Michigan and the United States. She received her Bachelor of Arts in creative writing and journalism from Western Michigan University.