Choosing Better Insurance

Most people are not likely to allow their homeowner's insurance to lapse. After all, this type of insurance covers the most expensive and most important purchase of your entire adult life. However, that does not mean that there will not be times that some people simply cannot afford to pay the insurance for a few days or a couple of weeks. 

A lapse for insurance occurs, and these people should count their blessings if nothing happens to their homes and properties during the lapse. If you are facing a lapse because you do not or cannot pay the annual premium, talk to your insurance company. Then consider the following really awful outcomes that could occur if you allow your homeowner's insurance to lapse.

Your Home Is Destroyed, but You Still Have a Mortgage

Imagine having to pay a mortgage every month on a home you no longer have. You have the land, but the house is gone. Whether a tornado or wildfires took it makes no matter. With no insurance coverage during the time of the home's loss, you are stuck paying on a non-existent home and the property on which it sat. It is akin to buying empty property at three to twenty times the value of the land alone. The mortgage lender is not about to release you from the mortgage either because when you signed the mortgage papers, you were required by law to ensure the home and property. You are stuck.

You Are Homeless and Penniless with No Money to Replace the Lost Home

Well, maybe that is not entirely true. If you were really savvy with your finances, you may have enough money tucked away for emergencies, but it probably is not nearly enough to replace the house you lost or make substantial repairs. At any rate, you are homeless, or at least living out of a hotel or staying with family and friends.

For people who have nothing stashed away, and are far away from friends and family, they really are homeless and penniless. The homeowner's insurance would have replaced your home with just the deductible payment. Now it has to come out of your pocket, or you live in your vehicle or a tent on the property.

There Is No Way to Backdate Claims

Sadly, you cannot reinstate your homeowner's insurance on the very day you have lost your house and then file a claim. Homeowner's insurance companies will want a full investigation because such claims are often the result of fraud and/or arson. You cannot backdate claims a day or two either since only claims filed within the insured period count toward monetary compensation.