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Quick citation guide Select a citation to automatically copy to clipboard.APA: Martin, S. (2024, August 19). What happens when your home insurance lapses? Bankrate. Retrieved September 18, 2024, from https://www.bankrate.com/insurance/homeowners-insurance/home-insurance-lapse/
Copied to clipboard!MLA: Martin, Shannon. "What happens when your home insurance lapses?" Bankrate. 19 August 2024, https://www.bankrate.com/insurance/homeowners-insurance/home-insurance-lapse/.
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Shannon Martin Writer, InsuranceShannon Martin is a licensed insurance agent and Bankrate analyst with over 15 years of experience in the industry. She enjoys helping others navigate the insurance world by cutting through complex jargon and empowering readers to make strong financial decisions independently.
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Jessa Claeys
Jessa Claeys is an insurance editor for Bankrate with over a decade of experience writing, editing and leading teams of content creators. She currently covers auto, home and life insurance with the goal of helping others secure a healthy financial future. Her work has been published by several insurance, personal finance and investment-focused publications, including Jerry, BiggerPockets, 401(k) Specialist, BP Wealth and more.
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Mark Friedlander
Mark Friedlander is director of corporate communications at III, a nonprofit organization focused on providing consumers with a better understanding of insurance.
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Most homeowners know the value of having a robust home insurance policy. Not having one can leave you vulnerable to out-of-pocket costs in the event of a disaster. But not everyone knows how to get homeowners insurance after a lapse in coverage. A homeowners insurance lapse can happen for a number of reasons, from a missed payment to an insurer becoming insolvent, but they should generally be addressed quickly so you are not left without coverage. Bankrate created this guide to help you understand what happens if your home insurance lapses and how you can be prepared if it happens to you.
A lapse in homeowners insurance can create both immediate and long-term financial damage. The immediate result of a policy lapse is a loss in coverage, which can quickly snowball into other issues. Below are some of the consequences homeowners may anticipate when a policy lapses.
A lapse in your coverage means that you are uninsured. It could be days or weeks, but the risk is the same; if something happens during the lapse period, you will not have any financial protection from homeowners insurance and will have to pay the expenses and losses out of pocket.
If you discover your insurance lapse within a few days of it occurring, your insurance company may be able to reinstate your policy. A reinstatement means your policy continues as is (without factoring the lapse) after you make your payment. However, this is usually an exception.
In most cases, you must pay any past-due amount and then start a new policy with a new effective date. Even a small lapse could lead to higher home insurance premiums since your carrier may find you riskier to insure due to the time you went without coverage. Any rate change — particularly an increase — that would have taken effect at the next policy renewal will usually become effective on your new policy start date.
Depending on the circumstances, you may find difficulty securing new coverage from other carriers after a policy lapse. Even the insurance company that insured you before your lapse may not offer new coverage depending on its underwriting guidelines. If you experienced a loss during the lapse, you may have to show documentation that the home is repaired in order to secure coverage. One of the questions most insurance applications ask is if you have had a home insurance lapse in the past. If you did, you might be denied coverage.
Maintaining an active homeowners insurance policy is a typical mortgage requirement from your lender. If your policy lapses, the insurance company is required to let the lender know your policy is no longer active. Typically, the mortgage company will give you a time frame to secure a new policy and provide proof of coverage. If you do not acquire a policy, the mortgage company will likely initiate a force-placed insurance policy to mitigate the risk of your home experiencing a loss while uninsured.
Force-placed insurance typically will not be the cheapest homeowners insurance policy available and could be even more expensive than your previous one. The coverage will also likely be more limited and often does not include personal liability coverage. If a homeowner does not pay the forced-placed insurance premium, they risk having their home placed in foreclosure.
Without home insurance coverage, you’d be responsible for repairing or replacing losses you experience out of pocket. Attempting to file a property insurance claim retroactively for a loss that occurred while you had a lapse in coverage is a felony that is punishable by jail time and significant financial penalties
If you do not pay your insurance bill after a certain amount of time, your home insurance will be canceled, creating a lapse in coverage. However, other situations can cause a lapse in home insurance too, including:
Any of these scenarios may cause you to lose home insurance coverage. Finding an alternative quickly before your insurance lapses and you end up without coverage is vital. There may be a short homeowners insurance grace period before coverage is canceled if the premium payment is not received on time, but if you receive a warning letter for nonpayment, you should act fast to avoid a lapse in coverage.
Getting homeowners insurance coverage after a lapse is crucial if you want to have financial protection against covered perils. Usually, the best course of action is to contact your insurance company immediately to see if your policy qualifies for reinstatement so your lapse can be rescinded. However, this option isn’t always possible, especially if the lapse was for more than a few days, if the property has experienced any unrepaired damage or if your policy has previously been reinstated to avoid a prior lapse.
Here are the steps to take to get homeowners insurance coverage after a lapse:
If you are struggling with the cost of your home insurance, finding ways to save on your premium could bring your budget some relief. Consider the following ideas to lower your rates:
Having your homeowners insurance canceled can be stressful. The insurer should send a letter explaining why your insurance is being dropped with an effective date. You will need to find a new home insurance policy to replace the canceled one so it’s important to start this process as soon as possible to avoid a coverage lapse, leaving you financially exposed to risks such as fire or theft. Some insurers may offer a grace period to accommodate a late payment, but you should not count on this.
The average cost of home insurance in the U.S. is $2,270 a year for $300,000 in dwelling coverage. There are numerous factors that play a role in determining rates, however, and each insurance company has its own method of weighing those factors, so you are likely to have a rate that is different from the average. You may pay less, for example, if you have a favorable credit rating and rarely, if ever, file a claim against your policy. Other factors can include the amount and type of coverage you purchase, your location and even how close your house is to the local fire department. Asking an agent about discounts can potentially help you save money on your policy.
It’s impossible to pinpoint a single carrier as the best home insurance company for all homeowners since every homeowner has different needs. Instead, consider what’s important to you, whether it’s affordable premiums, financial strength or dependable customer service. For example, USAA and Allstate tied for Bankrate’s Best Home Insurance Company Overall award. However, Lemonade won the award for Best Digital Home Insurance Company. So if you are a policyholder who values digital service options over all else, you may prefer Lemonade over an insurer like Allstate.
When a homeowner has a lapse of insurance coverage, this means they have a period of time where either their home went uninsured or they no longer needed a homeowners policy. A lapse can be unintentional, such as having your policy canceled due to nonpayment, or intentional, such as a homeowner selling their old home, but not yet purchasing a new one. In cases where there is a lapse in coverage due to a nonrenewal, nonpayment cancellation or a policy cancellation for adverse action, premiums can increase due to the financial risk involved with going uninsured. However, a mid-term policy cancellation could also occur due to your insurer being declared insolvent. Insurers are required by state regulations to notify policyholders in writing for nonrenewals and cancellations, and most states require a minimum 30 days’ notice for a mid-term policy cancellation or nonrenewal.
An insurance coverage lapse occurs after the grace period an insurance company provides expires. Depending on the insurance provider, policyholders may have a payment grace period where their payment is past due but the policy has not been canceled yet. This time frame is typically 30 days depending on the state regulations and individual insurer. As long as the policyholder makes the payment before the cancellation date of the policy, there won’t be a lapse in coverage.
Shannon Martin is a licensed insurance agent and Bankrate analyst with over 15 years of experience in the industry. She enjoys helping others navigate the insurance world by cutting through complex jargon and empowering readers to make strong financial decisions independently.
Jessa Claeys is an insurance editor for Bankrate with over a decade of experience writing, editing and leading teams of content creators. She currently covers auto, home and life insurance with the goal of helping others secure a healthy financial future. Her work has been published by several insurance, personal finance and investment-focused publications, including Jerry, BiggerPockets, 401(k) Specialist, BP Wealth and more.
Mark Friedlander is director of corporate communications at III, a nonprofit organization focused on providing consumers with a better understanding of insurance.
