Forced placed insurance is when the company you have your home loan through buys home insurance on your behalf. Don’t let this happen to you! Lender placed insurance, also known as forced placed insurance, is typically four to ten times as expensive as what you would buy on your own. This type of insurance also has much more limited coverage than what you would buy on your own.
If your lender wants to sell you forced placed insurance, use our calculator to find out a fair price. Just click the button below.
How do I avoid forced placed insurance?
First, be sure to make your home insurance payment on-time. Lenders and insurance companies communicate closely. Lenders often know within days if you have not paid the renewal on your insurance policy. The action the lender can take is to buy an insurance policy on your behalf. They buy the policy, but they don’t pay for it. They charge you for the insurance as part of your mortgage payment.
Second, be sure to have enough insurance to cover the replacement cost of your home. Your lender could also buy a lender placed policy for you if you are underinsured. Yes, even if you have insurance, the lender could still buy a policy for you.
Is forced placed insurance good insurance?
No. In addition to being overpriced, forced placed insurance is likely to be inadequate for your needs. For example, the lender does not care about your personal belongings. Therefore, there may not be any coverage of personal belongings. The lender only cares about the replacement cost of the home. Hence, they sell you insurance that protects them, not you. They also sell you insurance that is overpriced.
Find out how good your insurance company is by getting a free rating. Just click the button below.
Why is forced placed insurance so much more expensive?
Many accuse both lenders and insurers of over-charging consumers for this type of insurance. Whether those accusations are true or not, it is common for there to be large fees or commissions paid from the insurer to the lender. This drives up the cost of the insurance. This also creates a conflict of interest for the lender, incentivizing them to sell you poor quality, over priced insurance.
What should you do if you end up with forced placed insurance?
Immediately get your own policy in place. Be sure the policy you buy has adequate coverage to insure the home for the full replacement cost. Next, contact your lender and provide them proof of insurance. Ask them to immediately cancel the lender placed policy.
If your insurance never lapsed, provide proof of this to your lender. This shows there is no reason for them to purchase insurance for you. You should not be billed for the insurance they purchased on your behalf if your own policy was in force continuously.
Start by finding the best insurance companies in your state. ValChoice rates every auto and home insurance company that sells in the U.S. so you can find the best. Just click the button below.
Want to make buying insurance easy?
Buying the best insurance isn’t hard. We list agents that sell insurance for the best insurance companies in the U.S. on the ValChoice website. Click the button below to find an agent near you.