Your Rights and Duties Under a Lender Placed Insurance Policy
A “lender placed policy” or “force-placed policy” is insurance coverage put in place by your mortgage company or lienholder when you have not purchased insurance for your home. In the event your home experiences a loss, such as damage caused by a storm, a pipe leak, or a fire, a lender-placed policy may not provide the protection you would expect from a standard homeowners policy.
Lender-placed policies typically will not provide coverage for things like your personal property and will oftentimes be limited to the amount of the mortgage. So in the event your belongings are damaged by a leak in the roof, or you experience a total loss from a fire, the policy may not provide adequate protection. Despite providing less coverage and fewer protections than a standard homeowners policy, these lender-placed policies also often have higher premiums than standard homeowners policies. Further, many lender-placed insurance policies will list your mortgage company, not you, as the named insured. This means that, depending on the language of the policy, the mortgage company, not you, may receive any insurance proceeds issued as a result of damage to your property. This can be the case even though you own and live in the home. Further, if the insurance company denies or underpays your insurance claim, some lender-placed policies only give the mortgage company the right to sue the insurance company, not you.
Even though your lender-placed policy may limit your rights when the property is damaged, these policies still typically place certain duties and obligations on you, as the homeowner and the lender. These duties can include providing the insurance company with prompt notice of the loss, allowing the insurance company to inspect the property, taking precautions to prevent further damage, providing documents and information requested by the insurance company, and/or submitting to a record statement or examination under oath.
In the event you have a lender-placed insurance policy and your insurance company has denied your claim or failed to pay a fair amount for the damage, we are happy to assist you with analyzing the terms of your policy to determine your rights, obligations, and options under the policy.
– Erin Dix, Esq.
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