Despite the fact that the economy is slowing improving, there are still far too many people who are losing their homes to foreclosure either because a lost job just hasn't been replaced, or for another reason. If you are in this predicament, it's essential that you maintain your homeowners insurance during the foreclosure process, or you could be liable for damages if anything happens to your property or for medical expenses if someone injures themselves on your property..
In order to ensure that your homeowners insurance is up to date, you must first determine whether or not you're paying your insurance company directly, or whether you have an escrow account (impound account) and your insurance payments are included with your mortgage.
If you are paying your insurance premiums yourself, contact your insurer as soon as possible, and see if there's a way they can work out lower payments so that you can maintain your coverage. If nothing else, let them know what's going on. You should also ask if there's a vacancy clause in your policy - some insurers will cancel homeowners insurance once the home is vacant. You don't want that to happen..
If your insurance payments are escrowed, you should have a line item on your monthly mortgage statement showing the current balance of the escrow account, or you should have a statement somewhere in your files breaking out the balance. (Mortgage companies are required to provide a complete escrow statement at least once a year.). You'll want to see if there's enough cash to cover your insurance during the foreclosure process. Lenders typically keep a two-month cushion in the escrow account, so you should be okay for sixty days.
You'll need to call your lender, as well, and ask about their policy regarding insurance defaults. Most lenders will "force place" insurance with a company of their choosing, and this will usually cost a lot more than any coverage you could obtain on your own. If insurance is force placed, the cost of it will be added to the loan default..
Going through a foreclosure is scary, stressful, and embarrassing, but maintaining your homeowners insurance coverage is essential even if the cost of it is a strain. Never be afraid to ask your lender or your insurer for help. Most are willing to work with homeowners, as foreclosure is costly for them, as well.