Home insurance is a vital investment for all property owners. In some cases, it is a requirement. In others, you may not legally have to maintain it. Yet, a problem with your coverage could lead to a lack of financial protection. How does this happen? What can you do to avoid it?
Every property owner should consider the importance of mainlining their coverage. If it lapses, you could be at risk.
When Does a Lapse in Coverage Occur?
Everyone makes a mistake from time to time. You may miss your insurance payment due date. You may forget to sign the necessary documents. In all situations, if you fail to make a payment by the due date, the insurer often has the ability to cancel your policy.
When this occurs, the insurer may allow for a period of time for you to make up payment. They will probably give you fair warning, too. If you don't heed these warnings, you will receive a notification of the cancellation.
What Happens If an Incident Occurs?
Here is an example of why a lapse in coverage is worrisome. Let’s say your policy ends December 31st. You forget to make payment. Your insurer cancels your policy. You obtain a new policy, but it does not start until February 1st.
If an accident or a claim occurs in January, you do not have coverage. This means if someone files a lawsuit against you for an event in this timeframe, you do not have coverage. If your home catches on fire, you may not have coverage. That's a lot of money you stand to lose.
How to Avoid a Lapse
Again, everyone makes mistakes. However, all homeowners should take steps to minimize the risk of policy lapses. Here are some ways to avoid this:
- Set up automatic payments with your home insurance agent. This ensures you cannot miss a payment.
- If you think there will be a concern, call your insurer. Your insurance agent may be able to work around your needs.
- Try to make payments one time every six months or annually. This reduces the risk you will miss your payments throughout the year.
Never wait to make your payment. A lapse in coverage can also lead to a letter sent to your home mortgage lender. Most lenders require property owners to maintain coverage on their home. You may face penalties for allowing a lapse to occur.
Always speak to your home insurance agent about your concerns. They may be able to help you reduce your costs or help you to make payments more affordable to meet your needs.