Your lender requires that you carry adequate insurance on your property so they are protected in case of a fire or other major loss. If you do not renew your insurance on time, or fail to meet the lender’s requirements for coverage, your mortgage company can acquire insurance at your expense. This is called “forced-placed” or “lender-placed” insurance. This insurance can be expensive and will be added to your existing mortgage payments. On top of that, the insurance coverages may be limited and not cover personal items or owner liability should someone get hurt on your property. This means you are paying significantly more in premium for less coverage. Forced place coverage is designed to protect the lender and not the homeowner.
What do to if your lender places this insurance on your property:
Contact your insurance company or agent immediately to reinstate your insurance or get a new policy from a reliable, experienced insured like Prepared Insurance Company. Once you have evidence of insurance, present that to your mortgage company. In the interim, you should still pay the premium of the forced-placed policy so you won’t be at risk of defaulting on your loan. They must cancel the force-placed insurance and refund the difference for duplicate insurance.
It’s always best to fully understand what your lienholder requires before you commit to a policy on your property. It’s also important to discuss these details with your insurance agent. Protect your most precious asset. If you are unsure, ask questions to make sure you’re covered. That’s what’s nice about having an agent, they work for you and are happy to answer questions about the policy they suggested for you.