You know that home owner’s insurance is important, and yet even something as important as insurance can sometimes get pushed to the back burner in our brains. So, what exactly happens if by some chance your home owner’s insurance lapses?
What is an Insurance Lapse?
First let’s discuss what it even means for your insurance to lapse. An insurance lapse means that you have gone without coverage for a length of time. This means any length of time, even just one day without coverage is considered a lapse.
How Does This Happen?
An insurance lapse can happen a few different ways. The most common way in which insurance can lapse is through lack of payment of the premium. The insurance company can also cancel your policy due to physical changes to the property. These can include changes which now make the home unsafe. In rare cases fraud or misrepresentation of information can cause a company to cancel your policy. Policies can also be canceled if you simply fail to renew the policy at the appointed time. If you will notice, all of these scenarios could have been prevented with a little attention.
What’s at Risk During a Lapse?
So, what’s the big deal? Is it really that risky to let your home owner’s insurance lapse? Yes, it is absolutely risky. The first consequence of letting a policy lapse is that your rates could go up when you sign up for a new policy. The reason for this is because now the insurance company sees you as a risk.
Another risk is called “forced placed insurance.” Forced placed insurance is an action which is taken by the lender on your mortgage. For instance, if you are paying a mortgage on your house through a bank, then the bank has the right to purchase
a home owner’s insurance policy on your behalf. They will choose the policy, but you will pay for it. Usually a forced placed insurance premium will be added to your mortgage bill. You do not want this to happen because you have then lost the right to choose your own policy and in many instances forced place insurance is very expensive.
Having a lapse on your policy can also make it difficult to get insured in the future. The lapse will go on your insurance history and in the future insurers will see that you are a risky customer. You can speak with a ballwin mo home insurance representative today to learn more about your home owner’s insurance policy.
The last and most expensive risk you take with letting your insurance lapse is the obvious risk of something happening to your home while you are uninsured. Should damage be incurred to your home during the lapse then you will be responsible for those damages entirely out of your own pocket. In the event of a break in or a catastrophic incident this could be a huge blow to your family financially. To avoid a lapse in coverage you should always make your payments on time and stay up to date on renewals.