What You Need To Know About Force-Placed Insurance
As a mortgage lender, you understand there is significant risk when it comes to helping a buyer finance a home purchase. Besides the possibility of a homeowner not being able to pay back the loan, you also have to consider the possibility that a buyers mortgage insurance isn’t large enough to protect your interests. Moreover, that borrowers insurance policy may lapse. Should that occur, what are your options for protecting your interests in a mortgaged property? This is where force placed insurance coverage can help.
What is Force-Placed Insurance?
A force-placed insurance policy adds extra coverage on a property where the borrowers insurance has either lapsed or it was insufficient to cover the lenders interests. This type of protection is not only beneficial to the lender, but to the borrower as well, especially in the following scenarios:
- Failure of the borrower to maintain coverage through premium payments
- Expired, lapsed or cancelled policies
- Insurer backing out of homeowner coverage
- Inability to find an insurer to underwrite a policy due to high occurrence of natural disasters or high crime in an area
- Insurance that doesn’t fully cover a property’s replacement value
Do I Really Need This Coverage?
As a mortgage servicer, you have an obligation to protect the properties that you finance. While homeowners are expected to do their parts, a force-paced insurance policy helps cover potential gaps. You owe it to yourself to consult an insurer that specializes in this type of coverage.