When it comes to protecting your home, the last thing you want is to be forced into insurance coverage. Unfortunately, this is exactly what can happen if you fail to maintain proof of valid homeowners’ insurance. In such cases, lenders may opt for forced placed coverage without the consent or even knowledge of the borrower. If you are not sure what this type of insurance entails, read on for an overview of forced placed insurance and why it should be avoided at all costs.
What Is Forced Place Insurance?
Forced placed insurance is a type of insurance that is put in place by a mortgage lender when the borrower fails to maintain evidence of their own home insurance coverage. This type of policy is typically much more expensive than homeowners’ insurance and can include broader coverage such as flood or earthquake damage, which regular homeowner’s insurance may not cover.
In addition to being more expensive, forced placed policies have fewer consumer protections and less coverage for personal property than standard homeowner’s policies.
Why Is Forced Place Insurance More Expensive?
Because these policies are typically written with little information about the property or the borrower’s creditworthiness and liability risks, they come with higher premiums than regular home policies do. Additionally, since these are usually short-term policies that are renewed on a yearly basis, they don’t offer long-term discounts like traditional home policies do.
As a result, borrowers may find themselves paying much more for their forced place policy than they would for a standard home policy with comparable coverage limits and deductibles.
How Can I Avoid Forced Placed Insurance?
The best way to avoid forced place insurance is by providing evidence of valid homeowners insurance to your lender upon request. This will ensure that you are adequately covered in case something unexpected happens and will prevent your lender from having to take out a costly policy on your behalf without your knowledge or consent. It’s also important to review your homeowners’ policy at least once a year to ensure that it remains up to date with your current needs and that you continue meeting all necessary criteria for maintaining adequate coverage.
Mortgage Companies Require Insurance Coverage for Rebuild Cost or the Loan Balance
It’s important for homeowners to understand that mortgage companies often require adequate home insurance coverage. This can be a substantial change if you’re used to purchasing regular home insurance, as it may contain extras like rebuilding costs or the loan balance. Forced placed insurance can differ from traditional home insurance coverage in multiple ways, so it’s essential to familiarize yourself with the facts before signing on the dotted line.
If this topic is overwhelming and confusing, our blog post can help clear up any questions you have about forced placed insurance versus regular home insurance.
Flood Insurance is Required for properties in flood hazard zones
If you’re a homeowner who lives in a flood zone, additional flood insurance is a requirement. The coverage provides supplementary protection on top of what regular home insurance offers. It is essential to understand that while forced placed insurance can help safeguard your property and belongings against flood-related damage, it differs in important ways from regular home insurance.
To learn more about the differences between these two types of policies and how they provide different levels of coverage, be sure to check out our blog post on the subject. It will give you the insight necessary to make an educated decision about the proper level of protection for you and your family.
Homeowners Must Provide proof insurance at renewal and during after a policy cancellation
If you’re a homeowner, it’s important to understand exactly what kind of insurance coverage your home requires and when that insurance needs to be provided. At the time of purchasing your home, it will be necessary for you to provide proof of existing insurance coverage for the property. When it comes to renewal or refinancing down the line, this paperwork will need to be presented again for the process to move forward – even if you’ve never changed your policy or had any cancelations.
Additionally, should you need to cancel your policy at any point, proof of a new policy will have to be provided before things can move forward. It’s vital that homeowners comprehend all that goes into acquiring and maintaining quality coverage for their homes – and our blog is here to help guide you through this process!
It’s Best to Contact Your Homeowners Insurance Agent When Renewing Your Policy
One thing that’s important to keep in mind when purchasing or renewing a home insurance policy is forced placed insurance. This type of coverage, like regular home insurance, provides additional protection in the event of property damage or loss due to negligence and is often offered by title companies. It’s a good idea to contact your homeowner’s insurance agent and let your title company know as early as possible when you’re purchasing or renewing a policy so that they can help make sure you have the right kind of coverage.
If you’re unable to get regular home insurance due to certain issues like lender-required coverage or special circumstances, then forced place insurance may be the next best option and our blog post can help you learn more about how it works and what it offers.
Finally
Forced place insurance can be expensive and limited in scope when compared to traditional homeowner’s policies. However, there are steps you can take to avoid it entirely—namely by keeping proof of valid homeowners’ insurance on file with your lender.
By doing so, you can ensure that you have adequate protection against potential damage while avoiding costly premiums associated with forced place policies. Taking these simple steps now could save you thousands down the line!
Robert Macoviak is the President of Oyer, Macoviak and Associates. Oyer, Macoviak and Associates is the oldest independent insurance agency in Boynton Beach and has been in business since 1953. Oyer, Macoviak and Associates are vested members of the community who are committed to doing business face-to-face and being your insurance advocate in times of need.
