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Ask the Home Insurance Expert

I'm a little behind on my home insurance payments. I can't afford to make payments right now. How long do I have before the company cancels my policy?

It depends on your insurance company, but generally home insurance policies have short grace periods. Usually they send a 10-day notice of cancellation a few days after a premium is overdue.

Do whatever you can catch up. Can you pay by credit card? If you're having trouble making payments, contact your home insurance company to see about rearranging the payment schedule. Perhaps smaller, monthly payments might work better than a large annual payment.

Letting home insurance lapse leaves you with two big problems. First, if the insurer ends up canceling the policy, you're without any financial protection if catastrophe strikes. Once the policy is canceled, the insurance company has no obligation to pay for repairs if, for instance, a fire burns your house to the ground, a pipe bursts, or someone slips and falls on the front step and files a lawsuit.

Second, once your policy is canceled, you can't reinstate it simply by paying the overdue premium. You have to start all over and reapply, and most likely you will face higher premiums. The insurer might also require payment in full or a larger down payment on the new insurance policy.

Insurance applications include a question about whether you have ever been canceled. Insurance companies see cancellation as a red flag, an indicator that a consumer is high-risk, hence the higher home insurance rates. Still, it's important to answer honestly or you could wind up in trouble for lying.

For more, see insurance grace periods: When do you get cut off?

Last updated: Dec. 21, 2010