Protect Yourself from Forced Placed Insurance Policies
Mortgage lenders are facing increased scrutiny regarding the practice of securing “force placed insurance policies” on behalf of homeowners. These policies, which are purchased by lenders to provide homeowner insurance during a lapse in coverage, can be extremely expensive and often provide far less coverage than traditional, homeowner-purchased policies.
What’s the Problem with Force Placed Insurance?
It’s More Expensive
When lenders secure force placed insurance policies, they are purchasing on behalf of the homeowner, and tacking the cost of the insurance onto the home loan. Unfortunately, the cost of this insurance can be up to 10 times the cost of a policy the homeowner could obtain on his/her own.
The Huffington Post recently reported that a number of homeowners were charged as high as $8,000 for a forced placed insurance policy secured by their lender during a lapse in coverage, when an entire year of comprehensive insurance policy obtained on their own only cost $600.
It Might Not Protect You
Despite their high rates, force placed insurance policies may not even protect your home and assets. These policies are designed to protect the lender, not the homeowner. They typically cover up to the amount left on the home loan.
This means that even though you are fulfilling your obligation for insurance, you may lose your property and assets if your home is damaged or destroyed.
Tips to Avoid Force Placed Insurance Policies
- Pay your insurance premiums on time, every time. Keep records of payment.
- If you pay your insurance premiums into an escrow account, make sure you keep documentation.
- If possible, ensure that insurance coverage information gets sent to you, not just to your lender.
- If your loan gets sold to another bank or mortgage lender, notify your insurance company right away.
- If you receive an insurance coverage cancellation notice, work on securing new coverage right away.
Contact an Experienced Consumer Advocate Attorney
If you believe your bank or mortgage lender has taken advantage of you through a force placed insurance policy, contact Thomas J. Henry immediately. Attorneys are available 24/7 to talk to you about your rights.