Unexpectedly finding yourself paying for forced place insurance can create a significant dent in your monthly budget. This type of insurance is a lender’s response to expired or insufficient insurance, and it costs significantly more than your own policy. It sometimes as much as four times the cost of your own policy. Fortunately, there are steps homeowners can take to resolve their current insurance deficiencies and request that their lenders remove the forced place insurance policy.
What Is Forced Place Insurance?
Forced place insurance is an insurance policy that your mortgage company purchases to cover their interest in your home if:
- You let your home insurance policy expire, or
- Your policy does not meet their coverage requirements.
Forced place insurance generally only covers the cost of your mortgage. While other insurance policies cover your possessions and the full cost of replacing your home, as well as protect you in the event of a lawsuit, forced place insurance does not protect the homeowner and only replaces the cost that protects your bank or mortgage company.
Why Is Forced Place Insurance So Expensive?
Forced place insurance is generally more expensive than regular homeowners insurance. That’s because it is an extra step that your lender needs to take if they determine that you have not met the insurance requirements specified in your mortgage. Because your property must be insured in order to protect your lender, allowing your homeowners insurance to expire — or purchasing a policy that does not meet the needs of your area — gives your lender the right to purchase any policy they choose for your property.
In many circumstances, the cost of forced place insurance can cost multiple times the amount of a typical homeowners insurance policy. Because the cost of this policy becomes the homeowner’s responsibility, most lenders will not shop around for an affordable option.
If you want to know more about forced place insurance and how to get a more favorable policy, we can help. Contact Vargas & Vargas Insurance today.