You should do everything possible to ensure your home insurance coverage doesn't elapse. For example, you can pay your annual coverage upfront or sign up for automatic premium payments. Below are some consequences you might face if you let the coverage lapse.
The Lender Might Buy Coverage on Your Behalf
Mortgage lenders use different tactics to prevent their investments. Your lender's main aim is to ensure that they can recover their money even if you lose the house (for example, to a disaster) and cannot afford to repay the loan. The only way to get that assurance is for the lender to ensure you always have auto insurance coverage.
The lender might buy coverage on your behalf to ensure the home has adequate protection. Unfortunately, your lender might not go out of their way to compare quotes and buy the cheapest coverage available. Thus, you might incur unnecessarily high premiums because you eventually have to reimburse the lender for the coverage.
Your Premiums Will Likely Increase
The coverage lapse is dangerous since insurance companies evaluate your coverage history and use it to set your rates. A lapse in coverage shows financial irresponsibility. Thus, the insurance companies might use your past coverage gaps to predict future lapses. Insurance companies might increase your rates to cover your risk.
You Might Struggle to Buy Coverage
Some insurance companies might be reluctant to sell you coverage if you have a history of extensive coverage lapse. One rationale is that if you can shirk your insurance duties, you might also shirk your home maintenance responsibilities. Insurance companies view such homeowners as risky.
You Might Suffer a Loss During the Coverage Lapse
You buy homeowners insurance to shield you from financial losses in case of damage or loss of property. Thus, you expose yourself to serious financial loss if you let your coverage lapse. For example, a fire might raze down the house, a storm might lift off the roof, or a burglar might take off with your prized possessions. Without coverage, you have to cover the losses yourself.
Hopefully, your home insurance won't lapse and will always protect your property. Talk to your insurance agent for help if you struggle with home insurance payments. The agent can help you with advice on how to reduce your rates further and afford the payments. For example, you can shop for a different carrier, reduce your coverage, and sign up for more discounts.
Contact a local agency like Ronald H. Krupa Insurance Agency for more info.
After we purchased our first home, we realized that it might be a good idea to evaluate our insurance coverage. Although we had purchased homeowners insurance before, we had never owned a policy as large as the one we would need for our new place. Also, our new home had a trampoline and a swimming pool, which made us worried about liability. To iron out the details, I decided to meet with our insurance agent. We talked about things like monthly premiums, coverage limits, and deductibles, and it was incredible to learn more about the terminology. This blog is designed to help you with the same types of questions.