Yes, homeowners insurance policies renew automatically, so you need not worry about them being canceled if you forget that the policy is about to expire. Insurance companies typically send notification that the policy will renew automatically 30-40 days before the term ends.
The Benefits of Automatic Policy Renewal
Automated policy renewal saves customers from suffering a terrible loss and then realizing that their policy has lapsed. If this unfortunate occurrence happens, the homeowners have zero coverage for what could amount to the total loss of the home. Imagine if you forgot to renew your policy, and a few days after it lapsed, your home burnt to the ground. You would receive no compensation, and everything inside the home would also be lost. Few homeowners could recover from such a devastating disaster.
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With automatic renewal, you never need to worry about losing your home to a covered peril and having no insurance. However, the insurance company still requires you to pay the premiums to keep the policy in force. Even if the policy auto-renews, the company will cancel it if it receives no payment.
If you use automated withdrawal from your bank account or autopay with a credit card, you are covered for the renewal premium, provided you have sufficient funds or credit. Suppose you pay late or your autopay is denied for insufficient funds. In that case, most policies offer a grace period to keep coverage continuous, provided you make up the missed payment before it ends. It’s wise to check your policy terms to know how much time you have to rectify a missed payment before cancellation.
Why Setting and Forgetting Your Homeowners Insurance Is a Bad Idea
Though automatic renewal and auto payments prevent accidental policy lapses, you should avoid the temptation to just let your homeowners insurance policy ride without monitoring and updating it as needed. Paying little attention to your homeowners coverage can cost you both in higher premiums and inadequate coverage.
Watch Your Premiums
As with most items, insurance costs tend to rise over time, even if you never file a claim. The prices of repairs and replacements increase, so the insurance company must collect more from its customers to cover higher claims. In 2022, with inflation running at over 8%, many insurers may end up paying more to settle claims and raise their rates in response.
In addition, insurers may increase rates in your area due to large numbers of claims. For example, your rates could skyrocket if your neighborhood has a spike in theft claims or major storms have pummeled your region.
Also, if you filed a claim in the past year, the insurer is likely to raise rates at renewal time.
Home insurance companies must keep premiums level for the policy term, usually one year. If they intend to raise rates, they must inform you on the renewal notice. For this reason, be sure to read the notice and be prepared if you have to pay more.
Also, should the insurer raise your rates dramatically, you may want to shop around before the policy renews. Competitors may offer lower rates; however, before switching companies, make certain you compare apples to apples. A competitive quote needs to provide the same coverage levels.
Policy Updates
Homeowners should also contact their insurance company if they purchase new items that need separate coverage or the value of their home increases. For example, precious metals stored in the home require additional coverage, and a renovation may necessitate higher coverage limits.
Setting and forgetting your homeowners policy may lead to inadequate coverage or higher premiums. Though auto-renew is convenient and protects policyholders, you still need to monitor your policy costs and update overage as needed.
