All mortgage lenders require home owners to buy adequate homeowners’ insurance. If the home owners’ policy lapses or is otherwise insufficient, though, the bank will implement a lender placed property insurance on the home. Understand this insurance product as you protect your home.
Why Is Property Insurance Important?
When a bank loans you money for your mortgage, they assume a risk. If your home is damaged or destroyed by weather, fire, vandalism or another peril and you do not have insurance, they are responsible for expensive repairs.
Homeowners’ insurance is important for you, too. With it, you can repair or replace your home.
When do you Need Lender Placed Property Insurance?
You’ll only need lender placed property insurance if your homeowners’ insurance policy lapses. This could happen for several reasons.
- The policy is cancelled.
- Your existing insurer goes out of business or stops offering homeowners’ insurance.
- You forget to pay the premiums.
In any of these cases, you can purchase a replacement policy. But if you don’t, your bank will protect its interests with lender placed property insurance.
How do you get Lender Placed Property Insurance?
Your mortgage holder will notify you before they put a lender placed property insurance policy in place. They only put this policy in place after you’ve received several past-due or cancellation notices from your insurance company and they’re sure your homeowners’ insurance policy has been cancelled.
How Much Does Lender Placed Property Insurance Cost?
Lender placed property insurance can cost up to twice the amount of a regular homeowners’ insurance policy. While you’re responsible to cover the cost of the policy, you do not choose the company that issues it or the amount of coverage you receive. The lender has total authority over these decisions.
The increased cost is partially because a lender placed property insurance policy is usually put in place sight-unseen. The company doesn’t consider the home’s current condition, recent losses, occupancy or other details that could potentially decrease the policy’s cost.
What Does Lender Placed Property Insurance Cover?
A typical lender placed insurance policy has limited coverage. It may not pay liability claims if someone is injured on your property. It also may not cover personal items if they’re stolen, lost or damaged.
How to Avoid a Lender Placed Property Insurance Policy
To avoid paying for a lender placed property insurance policy, maintain the homeowners’ insurance policy of your choice. Pay your premiums on time and carefully examine and keep copies of all the paperwork your insurance company sends you.
A lender placed property insurance policy protects your mortgage lender and you. Know what it is as you protect your home.