What is Force Placed Insurance?

Homeowners in America typically hold some form of mortgage or deed of trust, which requires them to maintain sufficient homeowners insurance on the property to protect lender’s financial interest.

What is Force Placed Insurance?

If the homeowner allows their home insurance to lapse, then the insurance provider can apply force placed insurance to ensure that the property remains covered during this lapsed period. Also known as lender placed insurance, this coverage is often more expensive and covers less than typical home insurance.

This is because force placed insurance covers different damages than typical home insurance, such as not covering personal property damages or liability damages for the homeowner’s injuries or other individuals. Many consumers prefer typical homeowner’s insurance for its lower cost, as well as its wider range of damage covered.

Force placed insurance is typically implemented by the lender or bank if the normal home mortgage insurance has lapsed, been canceled, or deemed inadequate. While many homeowners are often disgruntled by the exorbitant cost of force placed insurance, the practice is not illegal.

In fact it is a common practice in the mortgage industry for banks and insurance companies to partner up and charge homeowners a premium for their force placed insurance policies.

Overview of Force Placed Insurance Abuse

However, this practice has allegedly led to numerous claims of abuse, including drafting up agreements that prevents banks from going to to competitors in search of different policies. The insurance company then allegedly takes a fraction of the homeowner’s insurance premium, and gives it to the bank as a kickback.

This not only encourages insurance companies to charge higher premiums, but often causes homeowners to pay much more for force placed insurance than a policy purchased on the open market.

Homeowners were also reportedly billed for force placed insurance retroactively. Furthermore, some homeowners have also reported they had been billed for force placed insurance while having an active home insurance policy.

Luckily there are some protections available for homeowners, as well as potential legal recourse if they believe their insurance company or bank may have illegally implemented force placed insurance.

According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the lender must provide the homeowner with two written notices and instructions of how to provide proof of active home insurance. If an insurance company or bank has not done this, than the homeowner may be eligible to file legal action for failing to follow the procedures set in place.

Force Placed Insurance Lawsuits

At this time, class action lawsuits have been launched into a number of different financial institutions for allegedly overcharging homeowners for force placed insurance.

Homeowners who believe they were illegally overcharged for force placed insurance, may be eligible to file legal action against these companies.

Join a Free Force-Placed Insurance Class Action Lawsuit Investigation

If you paid for force-placed insurance from a lender, you may be eligible to join a free class action lawsuit investigation into the improper charges you may have paid.

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