Insurance - Lender-Placed

What is lender-placed insurance?

People use many different terms to refer to insurance that a bank or mortgage servicer places on a house. You may hear the terms lender-placed insurance, creditor-placed insurance, or force-placed insurance.

Banks and mortgage servicers usually issue lender-placed insurance in response to three situations:

  1. The homeowner’s property insurance has lapsed, been withdrawn, or been cancelled.
  2. The homeowner’s property insurance doesn’t provide adequate coverage.
  3. The bank or mortgage servicer has no record of adequate homeowner’s insurance coverage.

  • Why is lender-placed insurance necessary?

    Why is lender-placed insurance necessary?


    Homeowners’ insurance protects the owner from loss or damage to a house or property. It also protects the mortgagee (the lender) from financial risk. Almost all mortgages allow lenders, banks, and servicers to acquire insurance for a house if it’s necessary to protect their financial interests in the property. Without adequate homeowners’ coverage, both the homeowner and the lender/servicer could incur a financial loss in the case of catastrophic damage. The amount of loss to each party would depend on the loan size and mortgage equity.

  • How does lender-placed insurance work?

    How does lender-placed insurance work?


    Depending on your loan type, if you have not provided your lender with proof of suitable insurance coverage, your lender may obtain an insurance policy on your behalf, in accordance with state guidelines.


    This coverage is generally basic coverage. It ordinarily provides insurance protection only to the lender for the loan balance.

    The borrower will be responsible for paying the monthly premiums on lender-placed insurance coverage.


    Please note: This coverage is often more expensive than regular insurance coverage you can obtain on your own. It’s in your best interests to purchase your own homeowners’ insurance policy from a reputable insurance agency.

  • Canceling my lender-placed insurance

    Canceling my lender-placed insurance


    Lender-placed insurance is usually a temporary measure. Your lender will cancel the coverage once they have determined that you have purchased your own policy and that it’s adequate and in good standing. Depending on the effective dates of your coverage, your lender can cancel the lender-placed insurance policy, either partially or completely.

  • What if I have my own Insurance Policy and a Lender-placed Insurance charge has been assessed to my loan?

    What if I have my own Insurance Policy and a Lender-placed Insurance charge has been assessed to my loan?


    Lender-placed insurance is issued only when we have no record of other insurance coverage and is effective only for the lapse period. Upon receiving evidence of in-force insurance that covers the lapse, the lender-placed policy can be fully or partially cancelled based on the effective dates of the coverage provided.

  • What happens if I don't provide proof of adequate Insurance Coverage for my property?

    What happens if I don't provide proof of adequate Insurance Coverage for my property?

     

    Depending on your loan type, if you don’t provide your lender with proof of suitable insurance coverage, your lender may obtain an insurance policy on your behalf (lender-placed insurance) pursuant to state guidelines.


    This coverage is generally basic coverage that provides insurance protection only to the lender for the amount of the loan balance (minus any financed insurance, points and land). You’ll be responsible for paying the monthly premiums on lender-placed insurance coverage.


    Note that this coverage is often more expensive than regular insurance coverage you can obtain on your own.