This Silly Mistake Almost Caused Our Homeowners Insurance to Be Canceled

When my husband and I signed our mortgage years ago, we knew we'd face numerous costs in the course of owning a house. And one big expense we have to budget for every year is homeowners insurance.

Some homeowners don't pay their homeowners insurance companies directly. Instead, they send their mortgage loan servicers a sum of money each month that's greater than their actual mortgage payment. The excess funds are put into an escrow account and are used to cover recurring expenses like property taxes and homeowners insurance, which those loan servicers take care of paying.

I, however, prefer to pay my homeowners insurance myself. I don't like the idea of having to send my mortgage loan servicer extra money every month. I'd rather keep the extra cash in my own savings account so it can earn interest, and then move money into my checking account and pay my insurer directly when my bill comes due.

Since I pay my annual homeowners insurance premium all at once, I get a small discount compared to paying it monthly. But this year, I accidentally neglected to pay my homeowners insurance premium on time. And it almost cost us our policy.

A really big oops with my homeowners insurance

Most of the bills I have are sent to me electronically. For some reason, this isn't the case with my homeowners insurance. 

To be honest, I'm not sure if that's because my insurer won't do it or if it's because I've yet to sign up for paperless billing. But since I only get one bill a year, it's not a big deal to shred a single piece of paper. 

This year, however, I must not have seen my homeowners insurance bill arrive in the mail. Or maybe I saw it, but it got buried under a stack of papers somewhere in my office. It's also possible that it never actually got delivered. 

Either way, the punchline is that I didn't see the bill and I didn't pay my premium when I was supposed to. As a result, we got a notice from our insurer threatening to cancel our policy due to a lack of payment.

Once that notice arrived, I paid the bill right away and then followed up with my insurer shortly thereafter to make sure it was received. I thought I had managed to resolve things painlessly, but nope. 

See, when we got the notice threatening to cancel our homeowners policy, our mortgage loan servicer also received a copy. It then threatened to buy us insurance and pass the cost on to us if we couldn't provide proof of having avoided that cancellation. 

So even once things were squared away with my homeowners insurance company, I still had to take the extra step of providing my mortgage loan servicer with proof that my premium was paid. That was a stressful and time-consuming hassle to deal with. 

And the frustrating thing is that it's not as if we were late paying due to a lack of money. I make a point to set aside funds every month for when my annual homeowners premium comes due. Rather, I simply didn't see a piece of paper, and that resulted in a lot of extra legwork.

Lesson learned

I certainly do not wish to have a repeat of the above fiasco. But it's also conceivable that a future piece of mail might go missing in my home, or en route to my home. So what I'm doing to avoid a repeat is signing up for autopay. 

Next year, when my insurance premium is due, I won't have to worry about not seeing the notice in the mail. Rather, the funds will just get debited from my checking account when they're supposed to.

If you have any major bill you only pay once a year, and you know that being late could have serious consequences, then it makes sense to see if setting it up to get paid automatically is an option. Of course, you'll need to make sure the associated bank account you use has the funds to cover that withdrawal. But that might prevent you from almost having your homeowners insurance, or another important type of coverage, canceled due to nothing more than a bit of carelessness on your part. 

You could also decide to have your mortgage loan servicer take over the process of paying your homeowners insurance. But, as mentioned, doing so will generally mean having to send it more money each month. If you don't want to do that, then autopay is a pretty good solution.