As it continues to be more and more difficult to find reasonable insurance options, some property owners might consider opting for an insurance policy provided directly by their lender. This type of insurance – also known as force-placed insurance – can come with hidden costs and significant risks. Continue reading as we delve into the pitfalls of force-placed insurance and offer alternative solutions. 

What is Force-Placed Insurance? 

Forced place insurance is obtained by a lender if a homeowner fails to maintain adequate coverage. This may happen if the previous insurance company is cancelling the policy. It can also happen though if a homeowner chooses to insure a property below the true replacement cost needed to rebuild. Because force-placed insurance is secured by the lender as a last resort, it primarily protects the lender's interest. It’s usually designed to cover only the structure of the home. Usually force-placed insurance doesn’t provide basic liability protection or protect personal belongings like clothing furniture and electronics.  This leaves the homeowner vulnerable to significant financial losses related to personal property damage, theft, or liability claims.

Renting Your Home? You Deserve More. 

Confirming the correct policy type is crucial, especially for rental properties. Force-placed insurance, may not be a good solution if your home is rented to others (whether for the short or long term). Instead, homeowners are often best served by a specialized landlord policy. Since force-placed insurance policies usually only protect the structure, these policies typically lack coverage for loss of rental income. Insurance protection for “Loss of Use” or “Loss of Rental Income” can be vital if you can’t rent your home out for an extended period of time due to a covered claim. To get this specific type of coverage, you’ll want to look for protection through an insurance expert instead of a last resort option through a lender. Trust us, your lender will likely want you to secure insurance elsewhere as well because you deserve more than the last resort.  

Limited Consumer Protections  

Traditional insurance policies provide homeowners with essential rights and protections. For example, most quality insurance policies give homeowners the right to dispute claims or settlements and access to recourse mechanisms in case of disputes. In contrast, forced-place insurance often lacks these safeguards, leaving homeowners with few options for recourse when dealing with coverage or claims. You’ll want to make sure that your insurance policy is there for you in your time of great need and – at the very least – you deserve the ability to dispute how a claim is handled if you disagree with the payout or approach.  

In today's complex insurance landscape, it might sometime seem easier to just go along with forced-placed insurance if provided by the bank. Especially if it’s less expensive than other alternatives. Do so thoughtfully though while knowing the pros, cons, and risks. You’ve invested a lot in your home, and you deserve to know it’s protected the way you want it to be.  At the Weiser Agency, we’re committed to providing comprehensive coverage that aligns seamlessly with your coverage needs and goals. Trust our team of experts to help you navigate the complexities of the changing insurance landscape.