Homeowners in Vermont generally aren’t required by state law to have homeowners insurance, but it’s a smart and wise move to keep a house insured. If you were to cancel the homeowners policy on your home, here’s what might happen.
If I Canceled the My Vermont House’s Homeowners Insurance, What Would Happen?
Your Mortgage Company Might Reinstate a Homeowners Insurance Policy
Even though homeowners usually aren’t required by state law to maintain homeowners insurance coverage, many homeowners in Vermont are required by the terms of their mortgage to keep a policy in effect. Lenders often include language in the mortgages they underwrite that states that homeowners must at least have enough home insurance to cover the lender’s financial interest in their house. If a homeowner fails to maintain this level of coverage, the lending institution might purchase a policy.
Thus, if you have a mortgage on your home and cancel your home insurance, the institution holding your mortgage might step in and procure coverage for the house. If they did, the premiums of the policy they select would probably be added onto your monthly payments, and its protections may only provide coverage for the lender’s financial investment in your home. There’s a good chance your equity and personal possessions wouldn’t be insured, and you almost certainly wouldn’t have liability coverage through the policy.
You Would Likely Be Personally Responsible for Any Losses or Claims
Without insurance coverage, you would likely be personally responsible for any losses or claims.
Any property loss could strain your finances, but certain losses could be especially difficult to recover from. For example, rebuilding after a fire destroyed your home and everything in it could cost hundreds of thousands of dollars. If the house was a total loss, you’d have to have it demolished, build a new house and replace all of your personal belongings. Few homeowners could financially recover from such a loss, even if they had some help from family and friends.
Even if you have the financial resources to rebuild your house and replace everything in it, you’d still potentially be exposed to claims that were larger than you could afford to pay. Liability claims for personal injuries can sometimes literally cost more than a house once all legal fees and settlements are tabulated.
A homeowners policy won’t protect you from every potential danger, for almost every policy has at least some limits and exclusions. A policy can, however, significantly reduce the likelihood that you’ll suffer such a financially devastating loss.
Home Insurance May Cost More in the Future
Canceling your home insurance policy to save on premiums is rarely a good idea. Assuming you didn’t have a mortgage and, therefore, could go without a policy, you wouldn’t have to pay premiums while your policy was canceled. If you ever wanted to get coverage in the future, though, your rates would likely be substantially higher.
Many insurers increase premiums for auto, home or similar insurance policies if there’s a lapse in coverage. Canceling your policy would cause a lapse, and you’d likely end up eventually paying more than you saved on premiums.
Call Your Vermont Insurance Agent for Help
If there’s some impetus causing you to consider canceling your homeowners insurance, contact an independent insurance agent in Vermont before you do. They can further explain the consequences of canceling home insurance so you’re fully aware of what might happen if you do cancel your policy. They can also work with you to address whatever issues you’re facing and help you find a more viable insurance solution.