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lender placed insurance advice
! Learn how to avoid or escape this costly business and get superior homeowner quotes from the best local insurers found.
Force Placed Insurance
How does force placed insurance arise? Home lenders require that the homeowner maintain adequate insurance on the property. Lenders wish to ensure that the loan collateral in the form of the house or building itself is protected from loss and damage due to hazards.
The terms of a mortgage loan require that the homeowner carry hazard insurance. Typically the homeowner satisfies this requirement through purchase of a homeowners insurance policy; a policy that does much more than simply protect against hazards such as fire.
Force placed insurance arises when the homeowner fails to satisfy this requirement. Force placed insurance, also known as Lender Placed Insurance may arise for the following reasons:
Lender Placed Insurance
1. The homeowner actually has a home insurance policy, but the mortgage lender has no proof of this policy, with the lender denoted as the mortgagee.
2. The lender does have evidence of home insurance coverage, but the policy limit or coverage amount is insufficient or the coverage does not satisfy specific requirements of the loan.
3. The homeowner does not have a policy in force. This may be because:
- a) A home insurance product was never purchased.
- b) The homeowner had a policy cancelled or non-renewed by the carrier.
- c) The home insurance coverage expired due to unpaid premium. In these circumstances the lender can act to impose force placed insurance on the homeowner.
Notification is important to avoid accidental force placed insurance where the insurer is not aware of coverage in effect (point 1.). If a lender requires evidence they will write to you and request it. Often this correspondence can be overlooked or discarded by the homeowner as a solicitation etc. One problem is that the actual lenders name may not appear on the correspondence where a third party service provider is acting on the lenders behalf.
If the loan provider does not receive a response then forced place insurance may result. Forced place insurance neatly describes the scenario since an insurance policy is literally forced upon you. We have noted how such polices are both expensive and inferior. But why?
Force Placed Insurance Comparison
Lets compare force placed insurance to a typical homeowners product purchased directly from the insurance marketplace by the homeowner.
Single Interest Insurance - Forced placed insurance that limits coverage or the policy limit to the outstanding loan balance only. Forced placed insurance referred to as a single interest policy; this type of coverage simply protects the lenders interest or collateral. If for example, the home is destroyed by fire, the policy pays enough to the lender to recoup the outstanding loan balance. May be referred to as collateral protection insurance. Nothing else is insured.
Duel Interest Insurance - More common, such force place insurance policies protect both lender and homeowner. Principally this is achieved by holding replacement cost coverage on the home. This means the home is insured for the full cost of reconstruction following a total loss. There is no further coverage.
Homeowners Insurance - A much wider package of coverage that typically includes:
- Replacement cost coverage for the home; the building and other structures
- Home contents or personal property insurance
- Personal liability insurance
- Loss of use cover
- Guest medical expense coverage
As we can see, a standard home insurance product affords much broader protection than a force placed insurance policy. Often force placed insurance can be more expensive than a superior homeowners product. Not surprisingly, homeowners that fail to keep their home insured against hazard via a conventional homeowners product can be financially exploited by the forced place insurance process. How to avoid this forced place insurance situation?
Force Placed Insurance Avoidance
Maintain constant and ongoing coverage on your home. Meet and exceed the limits and coverage stipulated in the loan agreement. Estimate and insure at 100% of replacement cost. Use a homeowners insurance calculator as required. Check your homeowner declarations page to ensure that the mortgagee details are correctly identified against the loan number. If your policy gets cancelled or is non-renewed then get quotes and replace with a new policy immediately.
Escape Force Placed Insurance
Collect free replacement policy quotes from reputable carriers today. Been hit with lender placed insurance or just discovered that lender placed insurance is being charged to you? Take action now. While lenders have a right to make forced placed insurance under your loan terms, you need not suffer forced placed insurance and can get this policy cancelled. How? By collecting free quotes from state carriers found here. Find a list of home insurers that can offer you a robust and superior homeowners policy quote that will very often cost less than the lender's force placed insurance. Get free quotes for a HO3 type policy, which is by far the most popular and prevalent home policy today. On receiving quotes, make your purchase decision and get this coverage effective. Make sure that lender requirements are met and exceeded with this new insurance quote. In most cases a standard homeowner HO3 product with proper limits is just fine, but check that you don't also need a separate and additional flood insurance policy. Now provide evidence of this homeowners coverage to your lender. Once you have evidenced your own coverage found in-place then the lender will cancel the force placed insurance. Assuming no lapse in coverage, the lender should refund any premium that you paid or were charged for in regard to the force placed insurance cover. For the best rates find carriers in your area here online and get free direct quotes for homeowners today.