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Benefits of Home Insurance: How to Get Homeowners Insurance After a Lapse in Coverage

OK, let’s start with the obvious: in an ideal world, you NEVER want to be without homeowners insurance. Because insurance is there for all the things in life that you DON’T think will happen. This is why if you have a mortgage (meaning the bank technically owns your home, NOT you), they will require you to have homeowners insurance: they want to protect their investment, and make sure that they don’t lose money in the event of the unthinkable.

This is a collaboration post. However, please know I stand behind everything written here, and only include links to products/services/resources I’m willing to recommend personally.

Here are two tales of the unthinkable:

Back in 2018, a leak in the water line to our refrigerator caused tens of thousands of dollars in damage across two floors of our home.

It took six months for everything to get put back together the way it had been before this happened. Our homeowner’s insurance covered everything except for our $500 deductible; that was all we had to pay out of pocket.

A few months before our leaky water line, hundreds of miles away, my childhood church experienced its third electrical fire in as many decades.

The “temporary” patch on the back of the church where my family worshipped when I was growing up, over 6 years past its expected lifespan.

Because they’d experienced two freak fires in the previous two decades, the then-pastor had decided – budgets being tight – that they no longer needed to keep up their insurance policy on the building, because surely they wouldn’t be so unlucky as to experience a THIRD freak fire.

Going on seven years later, the former church kitchen (seen here through a dust-streaked window) – and the fellowship hall, parlor, sanctuary, and choir loft – are still in ruins.

That third fire left the outside of the building mostly intact, but water damage destroyed the inside of the sanctuary and the rooms beneath it in the hundreds-of-years-old building. Six and a half years later, the building still sits empty – I can only imagine what the mold is like inside now! – because there is no way the small congregation can afford the repairs. This is what happens when building insurance policies – whether for a historic church or for your family’s home – lapse.

A few caveats:

Keep in mind that certain kinds of damage – most notably storm-driven flooding, but also in some cases damage from wildfires or hurricanes – are NOT covered by typical homeowners’ policies. Read the fine print carefully on your homeowner’s policy so you know what is/isn’t covered, and see if you can buy riders or separate state- or federal-run supplemental policies to cover the things your homeowners policy won’t.
Depending on where you live, it may be darn-near impossible to get a new homeowner’s policy because of human-fueled climate change. If this is the case, ask lots of questions to see what you can do to make you home an acceptable risk for insurance companies to take on and issue a policy to. For example, certain mitigation strategies to make your home more resilient in the face of climate change – such as creating a wide brush-free perimeter to lessen the chance of wildfire damage – could mean the difference between an “uninsurable” home and one that can get a homeowners policy.

Understanding Homeowners Insurance Lapses and Coverage Gaps

So now that we’ve covered some of the basics, let’s look at how you might end up without homeowners insurance. A lapse in homeowners insurance occurs when one of several things happens:

a policy is not renewed or gets canceled – for example, you forget to pay your premium on time; or
the insurance company terminates your policy – maybe because you filed too many claims against your policy, or maybe because of factors beyond your control, like an increased risk of damage from natural disasters.

While insurance IS there for legit claims to help you recover from catastrophic disasters, it should also go without saying that you don’t want to file a ton of frivolous or small-value claims against your policy. Try to make sure you have enough of an emergency cushion that you can cover a couple of thousand dollars’ worth of damage, loss, or theft without having to file a claim against your homeowners policy. This will help keep your rates lower, because your policy and home will not look so much like a “risky” investment to potential insurers and your current policy-holder.

What happens if my homeowners insurance lapses?

It’s super-important to NOT let your policy lapse for the very reason that the trustees of my childhood church, and all too many families in the path of storms and wildfires each year, learn the hard way: If you don’t have an active homeowners insurance policy in place, YOU the homeowner are 100% responsible for the costs of any and all damage or loss that occurs! Any incident that normally would be covered by insurance is now squarely the financial burden of the homeowners.

This is why understanding what happens if homeowners insurance lapses is so important when it comes to keeping your family home – not to mention your family’s finances! – safe. And not only are gaps in coverage risky in and of themselves, but they can also make it harder and more expensive to get new homeowners coverage down the road:

Potential insurers may see any lapse in coverage as a red flag. This could mean higher premiums, or a denial of coverage.
Likewise, a gap in insurance can also make obtaining a new policy more difficult, as a history of continuous coverage is often a factor in the underwriting process.

The Financial Risks of an Uninsured Property

Homeowners face substantial financial risk when their property is uninsured due to a lapse in coverage. The most apparent risk is the potential for a significant financial loss if damage to the property occurs while it’s uninsured. From minor damages that require expensive repairs – like our simple leaky water line from the former owner’s shoddy DIY repair – to catastrophic events that could result in total loss, the financial implications of NOT having homeowners insurance when you need it can be overwhelming.

And it’s important to remember that a lapse in homeowners insurance can lead to increased insurance costs in the future, even without any actual damage occurring. Insurance companies may increase premiums because of the perceived higher risk associated with lapses in coverage. In other words, attempting to save money by letting your coverage slide could end up costing you more in the long run even if you manage to dodge the bullet of unthinkable and unpredictable disasters; insurance companies will question why you had no coverage for a period of time, decide you’re a higher-risk customer, and crank up your premiums accordingly.

And it’s also important to remember that damage/loss to your actual home or property are NOT the only things covered by a homeowners insurance policy. There are plenty of other “what-ifs” that an active homeowners policy covers, such as accidental injury of visitors to your home. For instance, if a visitor is injured on your property during a lapse in coverage, you might have to pay hundreds of thousands of dollars out of pocket in order to cover their medical bills or legal fees in the event of a lawsuit.

Legal and Mortgage Implications of Insurance Lapse

From a legal perspective, a lapse in homeowners insurance can expose the property owner to various liabilities. As I just noted, homeowners are responsible for keeping their property safe and in good repair. If, say, the mail carrier or delivery driver injures themselves while walking to your front door because of negligence on your part, you could be on the hook for their medical bills, and they would have the right to sue the pants off you in order to get that compensation. Without the financial safeguard of insurance, such legal claims could put both your family’s savings and your assets at risk.

In addition, as I noted above, mortgage companies typically require continuous homeowners insurance as a condition of the loan agreement. Therefore, a lapse in insurance may breach the terms of your mortgage, leading to serious consequences. The lender could place “force-placed” insurance on the property, which is often much more expensive and offers less coverage than a standard policy.

Facing force-placed insurance also means a loss of control over one’s insurance choices, with the lender selecting the policy instead of the homeowner. This can mean you end up with coverage that doesn’t match your home and situation, which could be a financial nightmare for you and your family if something happens.

Steps to Take Immediately After a Homeowners Insurance Lapse

When a homeowner discovers their insurance has lapsed, immediate action is necessary. The first step is to contact the insurance company to discuss possible reinstatement. If this is not an option, the homeowner should seek new coverage without delay to minimize the period of being uninsured.

Negotiating with the insurance provider for a solution may be possible if the lapse was due to a misunderstanding or a temporary financial difficulty. Especially if this was the case, ask your insurance broker for a payment plans or a grace period to catch up on your premiums.

Another easy way to avoid forgetting to pay your premium on time in the future, or come up with hundreds of dollars on the spot to pay your annual premium, is to have your homeowners insurance collected as part of your monthly mortgage payment, held in an escrow account, and paid to your insurer directly by the company that holds your mortgage. This is what Dear Husband and I do, and it makes things so much easier.

What if it’s time for a new insurer?

As you negotiate with your insurer to get your policy reinstated, be sure you document EVERYTHING – every phone call, email, or other conversation. Include dates, times, and the person you spoke to, as well as notes summarizing the conversation.

If the insurance company cannot or will not reinstate the policy, even after you’ve tried to work things out with them, then it’s time to cut your losses and start shopping around. Do this IMMEDIATELY; do not delay.

It’s important to get quotes from several companies, so you can compare coverage and premiums and find a new policy that will realistically work for you.
At the same time, you need to remember that new insurers might require proof of continual coverage in order to secure the best rates on premiums. If your policy has lapsed, having that documentation of every phone call over the lapse in coverage, and what you tried to do to remedy the situation, could be helpful when making your case with potential new insurance companies.

The bottom line: NOT having homeowner’s insurance is a huge gamble, and it’s best to avoid going there if at all possible. With everything from the literal roof over your heads to your family’s financial future on the line, it’s much better to play safe than be sorry.

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