Force-Placed Homeowners Insurance: What It Is and How to Avoid It
If you have a mortgage, maintaining homeowners insurance is an important part of protecting your home and is typically an important requirement of your mortgage agreement. If you don’t maintain acceptable insurance, the lender may take action to protect its financial interest in the property.
What Is Force-Placed Insurance?
Force-placed, or lender-placed, insurance is coverage obtained by a mortgage lender or servicer when it determines that the property securing its loan doesn’t have acceptable insurance coverage. This differs from shopping for and selecting your own homeowners policy.
Why Might Force-Placed Insurance Occur?
An actual lapse in homeowners insurance is one reason, but a problem can also arise when the lender doesn’t have adequate evidence that insurance is in place. Notices from your mortgage company about insurance shouldn’t be ignored even when you’re confident you already have a policy.
Why Is Force-Placed Insurance a Concern?
Lender-placed coverage is primarily intended to protect the mortgage company’s financial interest rather than serve as a replacement for the homeowners policy you selected. Don’t assume it provides the same protection; it can be substantially more expensive than traditional homeowners insurance.
How Can You Help Avoid Force-Placed Insurance?
The most important step is straightforward: keep your homeowners insurance active. Pay premiums on time and consider automatic payment arrangements when appropriate. If you pay insurance through escrow, still review correspondence from both the insurer and mortgage servicer.
Make Sure Your Mortgage Information Is Correct
Keep lender information accurate on your homeowners policy. If your mortgage transfers to a different servicer or your loan information changes, make sure the right parties receive updated information.
What Should You Do If You Receive a Notice?
If you receive a notice, determine exactly what the mortgage company says is missing and verify the status of your homeowners insurance. If your policy is active, you may need to provide evidence of insurance or correct lender information. Contact your insurance agency when appropriate.
Protect Your Home and Your Mortgage
Keeping homeowners insurance in force and ensuring the mortgage company receives the right proof helps protect both the homeowner’s and lender’s interests.
Have Questions?
Oberryman Insurance Agency can help you review your property insurance and understand your coverage options. If you live in Northern Virginia or elsewhere in Virginia, Maryland, or Washington, D.C., contact Oberryman Insurance Agency to discuss your insurance needs or request a quote or coverage review.
Insurance coverage, eligibility, limits, deductibles, exclusions, endorsements, and availability vary by insurance company, policy, property, state, and individual circumstances. This article is provided for general informational purposes and is not intended to modify or replace the terms and conditions of an insurance policy. Please refer to the applicable policy and contact Oberryman Insurance Agency to discuss your specific insurance needs.
