Force-placed Coverage

Force-placed Insurance: What it is and why you don’t want it

If you are like many homeowners, you probably aren’t familiar with force-placed insurance and for good reason – it’s not something you want to have. So what exactly is it? In short, force-placed insurance is an insurance policy your mortgage lender purchases for you if you fail to provide your own policy.

The high price and limited coverage are two reasons why force-placed coverage isn’t ideal. Luckily, it’s easy to avoid getting stuck with a force-placed insurance policy when working with HomeInsurance.com. HomeInsurance.com is a one-stop shop to help you find an affordable policy with the coverage you want for your home. We help homeowners save on insurance every day.

Force-placed insurance explained

Still wondering about force-placed insurance? Sometimes homeowners think they can simply drop their home insurance policy after closing on a house, or they believe it doesn’t matter if they have a lapse in coverage. Either way, lenders will be notified if coverage ends and that’s when they’ll stick you with a force-placed insurance policy.

It’s in the mortgage lenders’ best interest to have some form of insurance on the property to protect them financially if it becomes damaged or destroyed. Without insurance, if something does happen to home, you’ll either end up continuing to pay the mortgage on an uninhabitable house or be forced to walk away and severely damage your credit.

There are three instances in which a lender may force place coverage:

  • You have insurance, but you haven’t shown your lender written proof.
  • You don’t have insurance because you canceled the policy or the insurance company notified you of a policy cancellation.
  • You have insurance, but the coverage amounts or type of coverage isn’t what you and your lender agreed upon.

How much does it cost?

A lot. In fact, force-placed insurance generally costs four or more times as much as regular home insurance. The high costs of force-placed insurance can even push at-risk homeowners into foreclosure. Refusing to pay the force-placed policy isn’t an option either. Due to the agreement you made by signing your mortgage loan papers, you are required to pay for the policy, high premiums and all.

What does it cover?

Another downside of force-placed insurance is that it usually comes with inadequate coverage. Why? Force-placed coverage is designed to protect the lender, not the homeowner. Here’s how force-placed coverage differs from your standard home insurance policy:

  • Unlike a standard home insurance policy, force-placed insurance often doesn’t provide coverage for the personal property inside the home such as your furniture, electronics, clothing, etc.
  • Force-placed policies do not provide you with personal liability coverage; if your neighbor’s kid gets hurt on your property, you could be responsible for all legal and medical costs.
  • The amount of dwelling coverage is another area to consider. A standard home insurance policy typically includes enough dwelling coverage to completely rebuild your house in the event of a covered loss. However, force-placed coverage often only provides enough to pay off the outstanding balance of the mortgage.

How to avoid force-placed insurance

The best way to avoid force-placed insurance is to have your own policy in place when you purchase your home. But just having it isn’t enough, you also need to send written proof to your lender when you buy insurance or any other time they ask for proof of coverage.

Keep home insurance costs down

Like most savvy homeowners, you look for affordable home insurance policy that you can trust. Luckily, there are many ways to lower your home insurance premiums.

Bundling is a great way to save money on both home and auto insurance. Bundling isn’t the only way to trim your annual premium. You might be eligible for other price breaks if you have a home security system, a non-smoking household, a light claims history, or a new home. When you call HomeInsurance.com, our agents will help you find money-saving discounts.

Another way to save on home insurance is by raising your deductible. Your deductible is the amount that you agree to pay on a claim before the insurer becomes liable for any damages. By raising your deductible, you can often lower your annual premium. However, you need to make sure you deductible is low enough that you have it readily available after an unexpected event.

Nobody wants to get stuck with force-placed insurance, which is why you should buy your own coverage. Call a friendly agent at HomeInsurance.com today and we’ll get you great coverage.