When your homeowners insurance lapse, it may make you seem financially irresponsible. However, these things may happen due to negligence and other factors. This is why you want to avoid a policy lapse no matter what. In this article, we discuss the main reasons why your homeowners insurance may lapse and how you can avoid policy cancellation. We also discuss how to get a new policy when your homeowners insurance policy has already lapsed.
Top 3 Reasons for Homeowners Insurance Lapse
In order to prevent policy cancellation, you must know the reasons why most insurance companies will cancel your homeowners insurance. Some of the more common reasons are non-payment of your premium, significant physical changes to the property, and fraud. Your homeowners insurance policy can also be canceled if the insurance company finds out that the property is vacant or if they find out about misrepresentation of the information in the policy.
1. Non-Payment of Insurance Policy
If you fail to pay your electricity bill for a certain time, your electricity would be disconnected. If you fail to pay your water bill for a certain time, the water company would send you a disconnection notice. This is also the case if you fail to pay for your insurance policy. There is a grace period provided when it comes to the non-payment of the insurance policy. Your policy would not lapse immediately when you fail to pay the policy the first time. However, continuous non-payment of the policy will result in a policy cancellation. Depending on your insurance company, you will be given a grace period before your property loses coverage.
2. Physical Changes to Property
Significant Changes to Condition of the Home
If the condition of your home changes significantly, your insurance company may think of this as a risk. For example, if you suddenly decide to build a swimming pool after getting insured, your home now faces added risk. Your insurance company will consider this as a misrepresentation and they may decide to cancel your policy. On the other hand, your insurance company will also consider your home to be uninsurable if the state of the home has depreciated.
Vacant Home
Vacant homes carry more risk simply because no one is there to take care of the home. No one will take care of gas leaks, busted pipes, or potential burglars. This means that no one will report these cases because no one will be aware of the damage. If your insurance company finds that your home is totally vacated, they can cancel your policy. Another option is your insurance company may ask you to convert your original policy to non-owner-occupied insurance, which is pricier.
3. Fraud
Fraud is the intentional misrepresentation of any information on your policy. If your insurance company finds out that you have lied about the information on your policy, they are legally allowed to cancel your policy. On top of that, they can file a legal claim against the fraudulent person.
How to prevent a lapse in your insurance policy?
First, it is important to be truthful when filing claims. All the data declared on your policy should reflect the true information. Next, you must always be up to date with your payments. In order to do this, you can set up a reminder for the deadline of your payment. You can also set up an auto-debit payment scheme to ensure that you would never miss your payment deadline.
How to get homeowners insurance after a lapse in coverage?
Your insurance company will send you a letter that will notify you of the policy and you may file for reconsideration. If your homeowners insurance policy lapses, you will be facing great financial risks. Moreover, your home is unprotected against the liabilities that you may face. This is why it is important to shop for a new policy once your insurance company sends you a notice for policy cancellation.
However, you may be worried that you will have difficulty finding a new insurance company after your old policy lapses. While this may be true, you are still eligible to purchase a new policy or have your old policy reinstated. Your new insurance policy may also have a higher premium since you will be marked as a risk. The best way to find a reasonably priced policy is to shop around and compare the prices offered to you.
Finally, the lapse in your policy is an unwanted circumstance that should be avoided at all cost. If in case you are already facing this situation, there is still hope that your policy will be reinstated. However, you should always make sure that there is no void in your insurance coverage because you will be facing greater risks as your home is unprotected against damages.
