7+ years writing insurance and personal finance content
Contributor to top media, including USA Today
A passionate personal finance advocate, Sarah’s writing has graced the pages of many of the personal finance and insurance industries’ top web publications.
Evelyn PimplaskarEditor-in-Chief, Director of Content
10+ years in insurance and personal finance content
30+ years in media, PR, and content creation
Evelyn leads Insurify’s content team. She’s passionate about creating empowering content to help people transform their financial lives and make sound insurance-buying decisions.
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A home insurance lapse can have far-reaching financial implications. Since you’ll be without homeowners insurance until you get your home covered again, you’ll be financially responsible for any damages that happen during the policy lapse.
Further, a lapsed policy could make it more difficult to get homeowners insurance in the future, or you may face higher premiums.
Let’s explore the implications of a lapsed insurance policy and how you can find affordable home insurance by comparing quotes from multiple insurers.
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Effect of a home insurance lapse
A lapse in your homeowners insurance policy can present a significant risk to your financial situation. Without a home insurance policy in place, you’re exposed to potentially severe financial losses if a fire, storm, theft, vandalism, or other disaster damages your home.
Beyond the financial exposure, your mortgage lender will likely force you to buy a more expensive policy until you get a new policy in place. But finding a new policy could be difficult.
Below is a closer look at the potential effects of a homeowners insurance lapse.
Your mortgage lender will buy coverage
Most mortgage lenders require you to maintain home insurance coverage. If your policy lapses, the mortgage lender might purchase insurance for you.[1] This type of policy is called a “force-placed insurance policy” or “lender-placed coverage.”
While the forced coverage provides some financial protection, it’s often significantly more expensive. In many cases, forced coverage provides less protection than your previous home insurance policy.
Since a force-placed insurance policy is often more expensive and provides less coverage, it’s ideal to avoid it.
You may have trouble finding coverage in the future
You might have a home insurance lapse for multiple reasons:
Your current insurer may cancel your coverage if you haven’t paid your premium.
An insurer may choose not to renew your policy if it’s reducing its business in your area.
The reason for your lapse can affect how difficult it is to get coverage in the future. If your insurer canceled or non-renewed your coverage for a reason, such as an unpaid premium, it may be difficult to get new coverage. But if the lapse was merely an oversight, and you’ve been a good customer, your insurance company may be willing to reinstate your lapsed policy.
If you’re able to find an insurer to work with you after a policy lapse, expect to find higher premiums for a homeowners insurance policy. The higher premiums reflect the fact that the insurance company may consider you more of a risk.
While you can shop around to find the best rate, you might find that your insurance policy cost options have risen across most insurers.
You’ll risk significant financial loss
A lapsed home insurance policy leaves you open to significant financial loss. If anything happens to your home during the lapse, you’ll be stuck paying out of pocket for the damages.
For Example
Let’s say your home insurance policy lapses for a few days. If a storm blows through and causes damage to your home during that time, you’ll have to pay for the repairs yourself without an insurance check to help cover the costs. For most homeowners, paying out of pocket for damages would be a significant financial burden.
How to get affordable coverage after a home insurance lapse
If your home insurance policy has lapsed, it’s critical to restore coverage as soon as possible. Here are some strategies to help you get the affordable coverage you need.
Get the lapsed policy reinstated
Start the process by calling your current insurance company for information about the lapse. Depending on the situation, you may be able to pay the unpaid balance to get your old policy reinstated. Many insurers offer a grace period after your payment due date until a policy lapses, which gives you a chance to restore your coverage.
Generally, this is the best-case scenario because you can get the coverage you need at the price point you already agreed to. But some insurers don’t offer an option to reinstate your coverage, especially if you’ve missed multiple payments.
If you pay your insurance premiums through an escrow account, that involves making monthly mortgage payments, which includes funds to cover your homeowners insurance policy each month. At the right time, the loan servicer sends those funds to the insurer on your behalf. If your policy lapses, get in touch with your mortgage servicer to determine why.
It’s possible that the lapse in coverage is due to your mortgage bank not paying for the applicable insurance policy on time, which means you could have a straightforward way to get your policy reinstated.
Comparison shop for a new policy
If you can’t get the lapsed policy reinstated, it’s time to look for new insurance. As you explore your options, make sure to get quotes for similar policies from multiple insurance companies.
Comparison shopping is important because every insurer has a slightly different method of determining premiums, which means you can find wildly different rates for home insurance. When you shop around, you can lock in the best rate for your unique situation.
Many insurance companies offer a long list of discounts for homeowners. For example, some insurers offer discounts to homeowners who make disaster-resistant upgrades, like installing storm shutters or reinforcing your roof. Other insurers offer bundling discounts for homeowners who also purchase other insurance products through the same company.
It never hurts to ask your agent if you qualify for a discount. The worst that can happen is they say no.
Choose a higher deductible
Insurers generally offer lower insurance premiums to homeowners who choose a higher deductible.[2] This makes sense because the deductible is the amount you’ll pay out of pocket before the insurer begins to pay for an approved claim.
Opting for a higher deductible is usually only a good idea if you have the money on hand to cover it at any time. If you can’t afford to cover the higher deductible, consider sticking with a lower deductible policy.
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Choose lower coverage limits
A home insurance policy with lower coverage limits often comes with a lower premium. While this might be good for your monthly budget, the lower level of coverage could put your finances at risk when filing a claim.
Assess your home insurance needs. Don’t purchase a policy that doesn’t provide the coverage you need.
Important Information
It’s standard for insurance companies to require you to insure your home for at least 80% of its replacement cost. This is called the 80/20 rule. Buying less coverage than 80% could mean your insurer might not cover a full claim amount if you file a claim.
Reasons home insurance can lapse
A home insurance policy can lapse for many reasons. Below is a look at some of the different reasons for a coverage lapse:
Non-payment of premiums: Not making premium payments on time can allow your policy to lapse. After a missed payment, reach out to your insurance company to avoid any lapses.
Misrepresentations on your application: If you lied on your application or intentionally left out some important details, like owning a dog, then the insurer may cancel your policy.[3]
Failure to maintain or repair your home: If you failed a home inspection and didn’t make the appropriate updates, like installing a new roof, the insurer may allow your policy to lapse due to the high risk. Maintaining the home is often a condition included in the fine print.
Vacant home: If your home is left vacant for 30 to 60 days, the insurer might cancel your policy due to a violation of the insurance policy terms.
Claims history: A record of too many claims could make you a risk to the insurer, which could push the insurer to cancel your policy.
Changes in your home’s risk profile: As your home ages, it may be riskier to insure due to outdated materials, which could lead to a canceled policy.
Changes in the risk profile of your area: A higher frequency of natural disasters or changing crime rates could make your home a high risk to insure, which means your policy could be canceled.
If you have questions about why your insurance policy has lapsed, reach out to an agent with your insurance company.
Home insurance lapse FAQs
If you have questions about home insurance lapses, this additional information may help.
Is it hard to get homeowners insurance after being dropped?
It can be. After being dropped, fewer insurers may be willing to work with you. The good news is that some insurance companies are still willing to offer a home insurance policy. And some states offer programs to help you get affordable coverage.[4]
How do you reinstate a lapsed policy?
Contact your home insurance company to ask about reinstating a lapsed policy. If the insurer allows for this option, you’ll likely have to pay the unpaid premiums immediately to reinstate the policy.
If your house is paid off, can you discontinue homeowners insurance?
You can, but it’s not necessarily advisable. If your home is paid off, then you won’t have a mortgage company that’ll require you to carry homeowners insurance. But opting out of homeowners insurance altogether leaves you open to financial risks if your home sustains damage.
Is an insurance lapse the same as a cancellation?
No. An insurance lapse means that your policy isn’t active, but you might be able to have the policy reinstated by catching up on your payments. In contrast, a cancellation notice means that your policy is terminated without an option to restore coverage.
Sarah Sharkey is a personal finance writer who enjoys helping people make savvy financial decisions. She covered insurance and personal finance topics. You can find her work on Business Insider, Money Under 30, Rocket Mortgage, Bankrate, and more. Connect with her on LinkedIn.
Evelyn PimplaskarEditor-in-Chief, Director of Content
10+ years in insurance and personal finance content
30+ years in media, PR, and content creation
Evelyn leads Insurify’s content team. She’s passionate about creating empowering content to help people transform their financial lives and make sound insurance-buying decisions.
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