Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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If you still live in your house then you should not immediately stop paying for home insurance after foreclosure, because your home insurance will still pay out for your belongings in the event of a natural disaster or accident.

You will want to keep your home insurance policy as current as possible for as long as possible.

Learn the reasons why in this article and then to find and compare the very cheapest home insurance options just enter your zip above for free insurance rates!

The Foreclosure Process

The foreclosure process can sometimes be a lengthy process, and isn’t quite as simple as it may occasionally sound—some might think, for instance, that if something is being foreclosed, that it’s a quick and immediate process with the bank evicting the home owner for nonpayment and taking ownership of the house.

While this is pretty much the case in the long run, the truth is that this a legal process with clearly stated laws at the federal level, state level, and local level, and you absolutely do have rights.

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Home Insurance Payment Options

What happens to home insurance once a home is beginning to go through foreclosure depends on how the insurance was paid to begin with. Home owners can either pay insurance directly from their own account, meaning they have it automatically deducted from their bank account, or they send a personal check in. Or they can have their home insurance costs included in their monthly mortgage payments with an escrow fund.

If you’ve had your insurance paid through your mortgage and your home is going through foreclosure, the mortgage company may decide to purchase its own home insurance policy. They will then add the insurance premiums to the loan amount you still owe. Then, if you begin trying to get back on track with your house payments, you will also have to pay back for the insurance the mortgage lender had to purchase.

Things are slightly different if you pay the insurance company directly. If you have missed a payment or two on homeowner’s insurance, do not simply stop paying altogether because you assume there isn’t any point to continue paying. Folks may be tempted to think, “I don’t own this house anymore, why do I need insurance?” You may even find people (who are definitely not experts) telling you to immediately stop paying to your home insurance policy. This is not very good advice.

In fact, it’s pretty bad advice, and it’s bad for a few reasons. One is that the home insurance policy will cover you and your belongings in the case of a disaster, fire, flood. It will also protect you if someone gets hurt while on your property. This is all coverage you probably want. If you immediately stop paying, you will definitely lose coverage and nothing in the home will be protected.

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Missing Home Insurance Payments

Even if a couple payments have been missed, the policy has not automatically lapsed, and you will still continue to have coverage for a few months. (Though it will lapse if you miss much more than this.) The policy will continue to cover damages should something happen to your home; though they will, however, also deduct the total past due amount you owe them from whatever settlement you may reach.

Do Not Let Policy Lapse

Just letting your policy lapse while you are going through foreclosure is not a good thing, period. For one thing, it can be incredibly expensive to reinstate insurance. Some companies may even require you to pay a year’s premium upfront. (It is worth noting, however, that if your coverage IS canceled due to nonpayment, the company will not sue you or charge you any additional fees.)

It may also be possible to stop the foreclosure process. You have the right to defend against foreclosure and also to take the time to discover the validity of the foreclosure at all. You can do a few things when the lender has initiated the foreclosure process. You can fight and defend yourself against the foreclosure lawsuit, or you can file for a temporary restraining order. This would keep the lender from being able to enter or try to take over the home, and would allow you to stay in your home until the foreclosure is proved valid.

So, if you have missed a month or so, but have the means to continue or catch up with your home insurance payments, don’t stop simply because you think there is no point. The most pressing issue, of course, is trying to save your home, but keeping your home insurance policy current is still an important issue to try to keep up with when possible, because you are entitled to continue to live in the house until new owners have officially taken legal possession of the home. Once the foreclosure is final, and the house has new owners, then you can stop paying your homeowners insurance on the house.