What Happens if I Don't Pay My Homeowner's Insurance?

Homeowner’s insurance policies cover more than just fire or flood damage. If your home is robbed or suffers minor damage from a storm, an insurance policy will often cover the costs to make repairs or replace stolen items. These policies may also provide you will another place to live should your home become uninhabitable due to a natural disaster.

Depending on your policy, you may have a six- or 12-month payment term. If you stop paying in the middle of your contract, the insurance company may send the remainder due to collections if you do not pay in full.

Missing even one payment can result in a loss of coverage for your home. This means that if your home is damaged, you will not have insurance money to cover any of the cost. If you find you need to repair a roof or fence because of a storm or rebuild your home due to a fire, you will have to pay for the entire costs involved yourself. You will also lose any coverage you may have had if your home were to be robbed.

Per the terms of most mortgages, the mortgage lender requires that the homeowner obtain and pay homeowner's insurance for as long as there is a mortgage on the home. If you stop paying your homeowner's insurance, the insurance company will notify your mortgage lender. The mortgage lender will likely send you notice that you must purchase a new policy immediately. If you do not, then your mortgage lender may have the right to purchase a policy for you and add the payments to your monthly mortgage bill. In such cases, the new policy usually costs significantly more than your original homeowner's policy. The state of Massachusetts publication, “A Massachusetts Guide to Insurance for Your Home and Ways to Help Reduce Your Insurance Premiums” also reports, “If you drop coverage or stop paying for it, some mortgage agreements permit the lender to take action against you to recover the amount that they did loan you.”

You may be considering dropping your homeowner’s insurance to save money. However, if you have a mortgage or the home suffers damage from a hazard, not paying your insurance is going to cost you more money than if you had paid the premium. With the fees the mortgage lender charges or damage to a home potentially costing several thousand dollars, the insurance premiums by comparison are inexpensive.