Did you know your lender can purchase insurance for your home if your policy lapses and/or they do not have proof of insurance coverage required for your property? This is called lender-placed insurance, and it can differ from home insurance policies you purchase yourself in a variety of ways. Our guide below walks through what to know about lender-placed insurance.
Questions? Reach out to one of our knowledgeable agents. We’re eager to set you up with the right coverage and rate!
What Is Lender-Placed Insurance?
Lender-placed insurance (also known as forced-placed insurance) is a policy your mortgage lender buys when you don’t maintain the insurance coverage required for your property. It ensures the property is covered, but often provides less coverage at a higher cost.
How Does Lender-Place Insurance Work?
If your servicer identifies that your policy has expired, they should send you a notice letting you know that they will place insurance on your home. The cost of this insurance will be added to your monthly mortgage payment. In many cases, if you already have an escrow account, the servicer will use the funds in this account to cover the insurance cost, which may cause a shortage to your escrow account.
If you’ve received a lender-placed insurance notice, it’s important to act fast. Contact your insurance provider to resolve any coverage gaps. Once you’ve reinstated your own homeowner’s insurance, provide the servicer with proof of coverage to remove the lender-placed insurance.
How Does It Differ from Standard Home Insurance?
Limited Coverage: Often excludes personal belongings and liability.
No Control: The lender decides the terms, not you.
Should You Avoid It?
In many cases, lender-placed insurance can create limited protection. It can also increase your mortgage payments, leaving you with less flexibility. The good news? In many cases, there are ways to avoid it.
- Stay current with your home insurance premiums.
- Notify your lender immediately if you change providers.
- Work with an agent to ensure continuous, affordable coverage.
At Cornerstone Insurance Agency LLC, we’ll help you avoid the pitfalls of lender-placed insurance and find the right policy for your home.
This article is for informational purposes only. You should not act based on this information without first consulting with your insurance agent; if you would like a quote from a Cornerstone Insurance Agency licensed agent, contact us. We disclaim all liability for actions taken or not taken by you based on the contents of this article which is provided “as is.” Cornerstone makes no representation that this content is error-free.