If money is tight and you fall behind on your homeowners insurance premiums, the consequences can be severe. Insurance companies have grace periods when policyholders who have missed a payment have an opportunity to catch up. If you don’t pay the amount you owe by the time the grace period is over, several things can happen.
Do your best to avoid falling behind. If you’re struggling to keep up with your bills, take action before you miss a payment.
Your Credit Can Take a Hit
If you miss a homeowners insurance payment, the insurer can turn your debt over to a collections agency. Having an account in collections can have a negative impact on your credit score. That can make it difficult to get an auto loan or a credit card.
You Can Lose Coverage
Your homeowners insurance company can cancel your policy if you don’t pay your bill. If your house gets damaged or broken into or someone gets injured on your property and you no longer have homeowners insurance coverage, you will be responsible for any bills associated with the loss.
You Can Have Trouble Getting a Policy Elsewhere
If you lose your homeowners insurance coverage, you’ll have a hard time getting an affordable policy from another company. Insurers consider customers who have had a lapse in coverage to be high-risk. You might have to pay significantly higher premiums, or you might get denied coverage altogether. If your insurer cancels your coverage, your mortgage lender might get another policy on your behalf, but it will most likely have higher premiums than your old one.
You Can Lose Your Home
A mortgage lender requires a borrower to have homeowners insurance. Since being uninsured is a violation of your loan agreement, your lender might foreclose on your home.
Be Proactive to Avoid a Problem
If your homeowners insurance payments are unaffordable, contact your insurance company or agent. You might be able to make a change to your policy that will save you money. For example, you might be able to raise your deductible, or you might learn that you’re eligible for a discount that can reduce your premiums.
You can also compare rates from other insurance companies. You might discover that you can get the same types and amounts of coverage you currently have from a different insurer and pay lower premiums.
You’ll have a much better chance of getting a new policy with more affordable rates when you’re still insured and your account is in good standing. This is why it’s in your best interest to shop around before you fall behind on your bills. Not missing payments can also protect your credit and help you avoid the possibility of foreclosure.
