Most home loans requires a homeowner to maintain adequate and consistent insurance. Normally, When you purchase a home, your lender requires you to purchase by obtaining a Homeowners Insurance Policy before closing on a mortgage. Maintaining a homeowners insurance on your property secures the lender's financial interest if the property is damaged or destroyed. This is one of the primary responsibilities of a property owner under a mortgage and is required for the term of the loan.
However, after the home purchase has closed, consider the possibility that a prospective homeowner drops his or her home insurance or simply stops paying his or her premium. In this case, the lender eventually will receive a notification that regular home insurance coverage is no longer set up. That is the point at which the lender will step in with Force Placed Coverage. The lender will now have to buy a coverage from an insurer for your property. The premium cost for this insurance is usually higher than your regular homeowners’ premium, and this cost may ultimately be shouldered by the homeowner.
How much Does it Cost?
The policy will be more expensive than what an usual policy would cost on the marketplace. Actually, force placed insurance policies premiums costs may up to 10 times greater than the normal insurance rates. Force-placed insurance is more expensive because lenders make a profit on the policies they purchase.
What Does it Cover?
The other issue with force-placed coverage is that the coverage is designed for the lender, not the homeowner. It often does not provide coverage for the personal property inside your home, such as your furniture, electronics, gadgets, etc. because force-placed coverage is designed to protect the lender, it could cover only the dwelling itself. It does not have personal liability coverage. If your neighbor gets hurt inside your property, you will be held responsible and liable for all legal and medical costs. In addition, force-placed coverage sometimes only provides enough coverage to pay off the outstanding balance of the mortgage.
How to protect myself from Force-Placed Coverage?
- Get the right home insurance at a reasonable price right from the start. Avoid a lapse in your required insurance coverage and pay the premium regularly.
- Read your mortgage contract carefully to determine the kind of insurance you need and make sure that you always have insurance that meets or exceeds the minimum requirements.
- Send a written proof to your lender when you buy insurance or any other time they ask for proof of coverage.
- Monitor your bank statements for a possible duplicate insurance payments to make sure your coverage wasn't force placed without your knowledge.
- Contact your mortgage lender immediately if force-placed insurance has been purchased for you. Be prepared to provide the proof of insurance, and follow up until the force-placed insurance is removed.
Force-placed coverage is very expensive, and it does not give you all the scope of coverage you need, so avoid it at all costs. No one wants to get stuck with force placed insurance, which is the reason you should buy your own coverage that caters your personal needs. Call a dedicated insurance agent at MyInsuranceGuy.biz today and we’ll get you on the path to low premiums and policy coverage you can count on.
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