What is Force Placed Insurance Coverage?

Every homeowner in the United States is required to maintain adequate hazard insurance, in the case of fire or other force of nature.

These policies are also meant to protect the lender’s financial interest by insuring the value of the property. However, in the case that the homeowners insurance slips or becomes insufficient, the bank, loan servicer, or other financial institution can implement force placed insurance.

Typical hazard insurance includes coverage for floods, earthquakes, and other damages that can be inflicted by nature.

When the homeowners can no longer maintain this insurance, force placed insurance is implemented by the lender to guarantee the coverage of the property.

Even though force placed insurance is meant to be adequate insurance, it is often more expensive and covers much less. Force placed insurance often does not cover damage for personal property, liability coverage in event the homeowners or another individual becomes injured.

There are a number of situations that can lead to force placed insurance, and it is important for homeowners to understand how to avoid them:

• The homeowner does not have hazard insurance, either because they did not purchase a policy or the policy was canceled after the renewal premium was not paid.
• The lender has not receive proof of homeowners insurance.
• The current homeowners insurance policy does not meet the lender’s requirements.

Force Placed Insurance Problems

As mentioned before, forced placed insurance is considerably more expensive than homeowners insurance. Homeowners often have trouble making payments on their normal insurance, but force placed insurance can lead to a negative escrow balance for the homeowner. This can result in the homeowner being forced into foreclosure and losing their home.

According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, lenders must send a notice of force placed insurance to the homeowners before it can be implemented. The notice must inform the homeowners that the lender does not have homeowners insurance and state the providers involved in presenting evidence of coverage.

The loan servicer must also send a second written notice, at least 30 days after the initial notice. If the homeowner does not provide proof of insurance 15 days after the second notice, then the lender can implement force placed insurance.

While force placed insurance is not unlawful, there have been numerous allegations from homeowners alleging force placed insurance abuse.

The allegations state that certain banks and insurance companies have partnered up to charge homeowners for their force placed insurance. The insurance companies allegedly take a portion of the force placed insurance premium and give it to the banks as a kickback payment to encourage banks to push policies with high premiums on their customers.

This results in homeowners paying much more in force placed insurance than they would have if they had purchased a policy on the open market. Consumers have also alleged being charged with force placed insurance, despite having active and sufficient homeowners insurance.

Homeowners who may have been affected by alleged improper force placed insurance may be eligible to file legal action against the company. Potential claimants are encouraged to contact specialized attorneys to determine if they are eligible to file a force placed insurance lawsuit.

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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