What happens if your homeowners insurance lapses

The mortgage company has the right to purchase a policy for the home to protect the company's interest and pay for it with the homeowner's escrow. This force-placed insurance typically comes at a higher rate than a policy the homeowner buys on his own.

You have no choice in the policy and will likely have worse coverage than your original policy. When a homeowner attempts to start a new insurance policy, any potential insurers will find out about the lapse.

The insurer sees the homeowner as a higher risk due to the period without insurance. The lapse potentially makes the homeowner look irresponsible or financially unstable. Insurance companies may also think the reason for starting a new policy is to file a claim on damage that has already occurred.

The increased risk potential often causes a higher premium on the policy or difficulty finding any company that will insure the property. Based in the Midwest, Shelley Frost has been writing parenting and education articles since Her experience comes from teaching, tutoring and managing educational after school programs.

Frost worked in insurance and software testing before becoming a writer. She holds a Bachelor of Arts in elementary education with a reading endorsement. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with investors. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system.

You get all of your notifications online, where did this one go? It went into the wicker basket, tucked between a grocery store mailer and birthday card from your old college roommate. You totally missed it. What are you going to do? When you reinstate your policy, are your premiums going to skyrocket? Ask your insurance about retaining the same insurance plan at the same premium rate. Why did the premium costs rise? If they are not, they can offer a new policy but at a rate they choose.

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A homeowners insurance lapse may happen to even the best of policyholders. An oversight on your insurance bill or a failed automatic payment may cause your coverage to lapse for nonpayment. It is relatively simple to handle — pay your past-due insurance bill, and your coverage should be reinstated. However, letting your home insurance lapse is risky and should be avoided.

If your homeowners policy lapses, even if just for one or two days, any damages that occur during that time, such as home burglary, windstorm or fire, could leave you without coverage to pay for your losses.

In addition, a lapse is noted on your home insurance record and could lead to higher insurance premiums in the future. 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 reasons besides nonpayment could cause your home insurance to lapse, 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. The homeowners insurance grace period is typically 30 days if you forget to pay your premiums.

If you receive a warning letter for non-payment, you should act fast to reinstate your policy and avoid a lapse in coverage.