What if My Lender Finds Out I Don't Have Home Insurance?

COSTA MESA, Calif. - June 4, 2020 - PRLog -- If you have a mortgage on a home, the home does not yet belong to you. It belongs to the lender with whom you have a contractual relationship. Not only are you paying a set amount each month towards ownership, you are actively maintaining insurance coverage on the mortgaged home. In some cases, you may be unaware that you have homeowners insurance because the lender took out a policy on your behalf and payments are included in the monthly payments you make. However, if you do not have homeowners insurance through your lender and your lender finds out, they will likely put force-placed insurance on your home. It's well within their rights to also foreclose on the property because you are, by default, violating the terms of your mortgage loan. It's best that you find out if you're covered right away. If you're not, compare home insurance rates (https://smartfinancial.com/home-insurance) to see who has the best coverage for you at the right price.

What Is Force-Placed Insurance?

Force-placed insurance is also called credit-place or lender-placed insurance. This is an insurance policy that is placed by a bank or mortgage service on a home if you do not have homeowners' insurance or if it's insufficient. If your insurance lapses due to nonpayment or if you are dropped by the insurer, your lender may take out insurance on your behalf, if another insurer will take you.

This is why it's so important not to file unnecessary claims and to make payments on time and try to keep your claims history clean. Otherwise, you may pay exorbitant rates for basic home insurance or, worse yet, you won't be able to get any homeowners insurance, which would cause you to foreclose on the house. That's why it's important to have the best home insurance (https://smartfinancial.com/home-insurance) in place and to safeguard that account at every turn.

What Do I Need to Know About Force-Placed Insurance?

For one thing, it's important to note that with a force-placed insurance policy, you're likely paying too much. There has been lots of reporting on how some lenders have vested interest in these policies for the wrong reason. But regardless of whether or not your lender is placing insurance on your home to protect his financial investment or if he's got a side gig, it doesn't matter. Your home should never be unprotected for even a single day.