Whenever a homeowner takes out a loan to purchase a home, it is a requirement from the lender to require that the homeowner purchase insurance to place on the home.

Typically, homeowners purchase their own insurance to place it on the whole, but in certain circumstances, other business entities may place an insurance policy on the home itself – a practice known as force-placed insurance.

However, certain policies undertaken as part of Citibank force-placed insurance on homes has come under great scrutiny in the past and is currently being investigated.

What Is Force-Placed Insurance?

Homeowners are required to place insurance on their property due to the possibility of the home undergoing some type of damage. Sometimes this damage is due two things like a burst water pipe causing a flood in the home, and other times it may be the result of severe weather or natural disasters.

The property insurance is required because property damage decreases the home’s value. When the home is not paid off, the lender does not want to take responsibility for the property’s decline in value. Homeowners insurance then protects against property damage as well as home values that decline resulting from weather, disasters and other accidents or situations.

Most commonly, homeowners choose their own insurance company to place this type of coverage on the property.

When homeowners sign their mortgage paperwork, typically their contract includes information about the need for having constant coverage by a homeowner’s insurance policy.

If the policy lapses due to nonpayment or for other reasons, there is typically a clause in the contract stating that when there is a lapse of coverage, the homeowner agrees to allow the mortgage company to force-place an insurance policy.

Controversy Surrounding Force-Placed Insurance Policies

While homeowners completely understand the necessity for force-placed to insurance policies, the terms surrounding these policies have caused a great deal of controversy.

A number of mortgage lenders have been accused of partnering with insurance companies to force-place insurance policies on properties that are excessive and unnecessary. They say that the insurance companies place policies with way more coverage than is necessary, and charge homeowners for these extravagant policies.

Additionally, mortgage companies have been accused of receiving kickbacks from the insurance companies who receive their exclusive referrals for force-placed insurance.

Previous Citibank Force-Placed Insurance Settlements

One the bank that has particularly come under fire for its force-placed insurance policies is Citibank. Critics of the company’s policies say that Citibank force-placed insurance is unlawful and exploits homeowners.

In a $110 million settlement over Citibank force-placed insurance finalized in 2014, Class members in two different lawsuits against the company were able to recover 8 percent of force-placed insurance premium costs stemming from the allegedly excessive insurance. Class members claimed that Citibank improperly profited from the insurance.

Filing a Citibank Force-Placed Insurance Lawsuit

If you are paying for Citibank force-placed insurance, or insurance that was force-placed by another institution, and you believe the coverage was excessive and the costs were significantly more than your original homeowners insurance policy, you may be able to take legal action to recover your financial losses.

An attorney experienced with issues surrounding force-placed insurance can review your case for free and can help guide you in your legal options.