What happens when your homeowners insurance lapses?

If you stop paying your policy premiums, you’ll have what's referred to as a lapse in coverage and your home will be without coverage.

Pat Howard 1600


Pat Howard

Pat Howard

Property and Casualty Insurance Expert

Pat Howard is a senior editor at Policygenius specializing in property and casualty insurance. His work has been featured on Property Casualty 360, Fatherly, MarketWatch, and more.

Published April 23, 2020|4 min read

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Your homeowners insurance policy covers your home for as long you pay your policy premium — if you stop making payments, you’ll experience what’s referred to as a lapse in coverage. Your insurance company will typically give you a 30-day grace period to pay the balance, after which point your coverage will be canceled if the premium remains unpaid.

It’s possible to get your policy reinstated or start new coverage with a different company, but keep in mind that lapses stay on your record and you’ll likely have to pay a higher premium going forward.

Key Takeaways

  • If you stop making policy payments, your insurance company will typically give you 30 days to pay the balance

  • Once your homeowners insurance is canceled, you’ll have what’s called a lapse in coverage which could increase your premiums and make it more difficult to get insurance going forward

  • When your coverage lapses, your mortgage company will likely purchase insurance on your behalf, but it is pricier and less effective than standard coverage

What is a homeowners insurance lapse in coverage?

A lapse in coverage is when you go without coverage for any length of time. During the lapsed period, your homeowners insurance is inactive and you’re on the hook financially for anything that happens to your home. Unless you’re the CEO of a Fortune 500 company and can afford to rebuild your home out of pocket, it’s a bad idea to let your insurance policy lapse.

Here are a few reasons why your home insurance company may cancel your coverage:

You failed to make necessary repairs to your home

If your home is in bad shape or it was misreported in your initial quote, your insurance company may cancel your coverage outright. Your insurer may also list certain conditions that you need to correct in order to keep the policy active. These conditions could include replacing a section of your roof, getting protective netting for your trampoline, or removing fire hazards like tree branches or dry grass and brush around your home. Most insurance companies give policyholders up to 30 days to correct any impediments to coverage.

Your risk changed

Your insurance company may also cancel your policy if your risk changed substantially. For example, if you buy a new dog, that can change your risk drastically. Your insurer may also cancel your policy if you live close to an area that recently experienced a costly natural disaster, like a hurricane or wildfire.

You lied on your application

If you stated in your application that you don’t have any pets but your company finds out otherwise during the inspection, it will likely drop you from coverage

You stopped making payments

If you stop paying your homeowners insurance premiums and don’t pay off the balance by the end of your grace period, your coverage will lapse.

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What happens when your homeowners insurance lapses?

Once your homeowners insurance lapses, your home is without coverage. That means if your home is damaged or burglarized, you won’t be able to file a claim and get reimbursed for the loss.

Your mortgage company may purchase insurance for you

If you stop making homeowners insurance payments, your insurer will likely notify your lender as well. Your mortgage company is technically a loss payee on your policy, meaning it receives any paperwork from the insurance company that you receive, including a lapse or policy cancellation notice. To ensure its investment is protected, your mortgage company will likely purchase what’s referred to as forced-placed insurance (also called lender-placed coverage) for your home. You’ll then pay the policy premiums into an escrow account via your mortgage payment. Forced-placed insurance is generally more expensive and contains less coverage than standard homeowners insurance — it should be avoided.

Your homeowners insurance premiums go up

Insurance companies consider financial health to be a big indicator of insured risk. The lower your credit score, the likelier you are to file an insurance claim. Similarly, if your homeowners insurance lapses because you failed to pay your premiums, that could be an indicator to your next insurer that you lack financial stability and you’ll likely be charged higher premiums.

It may be harder to get insurance going forward

Similar to how insurance companies may turn down applicants who have too many claims on their record, some companies will also refuse to insure your home if you have any gaps or lapses in your insurance history.

Can you get homeowners insurance after a coverage lapse?

There are many reasons why your homeowners insurance coverage may have lapsed. Maybe you were recently furloughed because of the circumstances from Covid-19 and can no longer afford your premiums or a roof repair to pass your insurance inspection, or maybe you simply forgot to make a payment.

Whatever the cause, be sure to talk to your insurance company about the reason for the lapse in coverage and see if it’s possible to reinstate your policy. Many companies, for example, are reinstating policies that lapsed because of unpaid premiums from Covid-19–related financial hardship and are actively working with policyholders to form payment solutions. Be sure to talk to your insurance company about your circumstance — any payment or inspection–related lapses during the pandemic may be left off of your record.

If your coverage is reinstated, be sure to inform your mortgage lender so that they know to cancel your lender-placed coverage.

If your homeowners insurance company refuses to reinstate your policy, you’ll have to apply for coverage with a different company. Some insurance companies specialize specifically in insuring high-risk properties and homes with no prior coverage.

If you’re finding yourself denied on the private market, consider a Fair Access to Insurance Requirements Plan, or FAIR Plan. A FAIR Plan is a last-resort insurance option for high-risk applicants who have gotten denied a certain number of times on the private market. Like lender-placed insurance, FAIR Plans are more expensive and contain less protection than standard coverage.

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