15 Aug What is Forced Place Insurance?
Article Written by: Tom Lynch
You went through a lot to get the financing for your home through a Mortgage company; the least they can do is look out for you, right?
Well the Federal Government is proposing new rules to help this happen. Some of these new rules include; requiring the Mortgage Service companies to provide a clear monthly statement, provide warning before an interest rate change and, most importantly, options for avoiding “Force-Placed” insurance!
So what is Force Placed Insurance?
Because the lender has a financial interest in the house, they legally have the right to insure it. If you don’t provide proof that it is
insured, they will have a policy issued to cover the property and then charge you the premium. While this may seem like they are truly looking out for your investment (and theirs as well), these force placed policies can cost up to
THREE TIMES as much as a typical policy. The lender isn’t concerned about the premium of the policy, because they don’t have the time to shop your policy. This may still occur even if you maintain a policy on the property! How does this happen? If your insurance carrier does not notify the mortgage company of your they will assume that you do not have any in place and force place
coverage.
NPR has provided a great summary of the new proposed changes:
“The rules also help guarantee that borrowers aren’t forced to pay excessively premiums on homeowners’ insurance that servicers require
them to carry. In the past, servicers tacked on insurance when they believed someone’s coverage had lapsed. The premiums could be several times bigger thanon a typical policy.
The rules would require servicers to notify borrowers twice before charging them for insurance. They would have to cancel the insurance
within 15 days if borrowers proved that they already had coverage.”
It is important to stay on top of your coverage as well as making sure your lender has current information. Your lender may even change,
sometimes without notice to you, if your loan was bought by another servicing company.
How Do We Avoid Forced Place Insurance
Develop a relationship with a professional and trustworthy California Insurance Broker who can help make sure that your policy is set up to inform the mortgage company of your coverage.
As always, please feel free to give our Home insurance specialists a call at 925.297.4564 or complete the contact request form to the right.
You can read the full NPR Article here.
*Please Note
that the above are for information purposes only and do not interpret or imply
coverage. For complete information regarding your California Auto Insurance
Policy please contact your agent or carrier.