What Is Force-Placed Insurance on a Home?

Kim Porter
Written byKim Porter
Kim Porter
Kim Porter
  • Co-authored the book “Future Millionaires’ Guidebook”

  • 13 years writing personal finance content

A former chief copy editor at Bankrate and past managing editor at Macmillan, Kim specializes in writing easy-to-understand, actionable personal finance content.

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Danny Smith
Edited byDanny Smith
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Danny Smith
  • Licensed auto and home insurance agent

  • 4+ years in content creation and marketing

As Insurify’s home and pet insurance editor, Danny also specializes in auto insurance. His goal is to help consumers navigate the complex world of insurance buying.

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Updated January 12, 2023

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Force-placed insurance is an insurance policy a lender places on a home when the homeowner’s policy has lapsed or doesn’t include enough coverage.[1] It allows the mortgage lender to protect its financial interest in a property.

Force-placed insurance can also be placed on a vehicle, and it’s typically something you want to avoid as a borrower, as you’ll be footing the bill.[2] Force-placed insurance is usually more expensive than a regular policy and may not even provide all the necessary coverage.[3] Here’s what to know about force-placed insurance and how to avoid it.

What is force-placed insurance and how does it work?

Force-placed insurance, also known as lender-placed insurance or creditor-placed insurance, is a policy your mortgage lender can take out on your behalf. This typically happens if your home insurance policy is canceled, expires, or doesn’t meet your lender’s requirements.

Your lender may withdraw funds from your escrow account to pay for the force-placed policy. Your lender will then add the premium cost to your monthly mortgage payment. You won’t be able to choose the insurance company, coverage options, or policy limits — as you would if you bought a traditional policy yourself.

You’ll know before this happens, though, as your loan servicer must notify you in writing at least 45 days before taking out and charging you for a force-placed insurance policy. You’ll also receive follow-up reminders in which your loan servicer will explain the force-placed policy, how much it will cost, and steps you can take to avoid or remove it.[4]

Learn More: Is Homeowners Insurance Required?

What does force-placed insurance cover?

Forced-place insurance typically covers the same things as a standard homeowners insurance policy, like the dwelling, personal belongings, and liability, though usually in a much more limited capacity.

Because force-placed insurance is designed to protect your lender’s financial stake in your property, it “typically has very limited coverage,” says Dominic Frey, an insurance professional at Hitchings Insurance Agency. It will include the dwelling itself, and “if there are included coverages, such as for detached structures and personal property, it will be very minimal.”

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How much does force-placed insurance cost?

A force-placed insurance policy usually costs more than a regular home insurance policy you’d buy for the following reasons:

  • These policies are high-risk: “Force-placed is inherently a higher-risk policy because the current homeowner’s insurance has lapsed,” says Stacy Tucker, a State Farm insurance agent.

  • The homeowner foots the bill: The lender selects the coverage and policy limits and is more concerned with protecting its investment than saving you money.

  • You can’t shop around for coverage: You can’t compare companies and costs since the lender is purchasing the policy.

  • No discount options: You can’t customize your policy by adding discounts or bundling your home and auto insurance.

“You aren’t able to shop around to find the best [company] that will fit your needs,” Frey says. “A forced-placed policy is more uniform and doesn’t take in as many factors to find a better rate. [It’s a] blanket ‘one-size-fits-all’ kind of policy.”

Check Out: Top 12 Home Insurance Discounts and Saving

How to remove force-placed insurance

Force-placed insurance is usually costly and offers less protection for you — so it’s typically not a better option than purchasing your own policy. If your lender has purchased insurance for your home, you should work quickly to remove it. Here’s how.

  1. Understand your lender’s request. Read through your notices to understand why your lender purchased insurance on your behalf. For instance, you may have sufficient coverage but your lender doesn’t have proof of it, or your policy may have expired without your knowledge.

  2. Continue making payments. You’ll need to keep making payments on the force-placed insurance until you get your own homeowners policy in place. Failing to pay the bill could put you in violation of the terms of your mortgage. At that point, your lender may be able to start foreclosure proceedings.

  3. Get homeowners insurance. Depending on your situation, you may either reactivate your insurance policy (with a sufficient amount of coverage) or buy a new insurance plan.

  4. Submit proof of insurance. Show your mortgage lender that you have sufficient homeowners coverage, and ask for the force-placed policy to be canceled.

  5. Follow up. Your lender is required to cancel force-placed insurance within 15 days of receiving proof of sufficient coverage from you.[5] Call the loan servicer to check this was done, and ask for confirmation in writing. Also, look for a refund of any leftover premiums.

  6. File a Qualified Written Request. If your lender failed to remove force-placed insurance, you can send a Qualified Written Request (QWR) to ask for information about the loan servicing or to dispute errors in your loan account.[6] Lenders are required to confirm they received the letter within five days and respond within 30 days. Borrowers can typically find the correct mailing address on their loan servicer’s website or by calling the servicer and asking for the address.

  7. Get further help if necessary. Consumer help is available through not-for-profit housing counselors or the insurance division in your state.

How to save on homeowners insurance

One reason lenders might apply force-placed insurance is if your policy lapses, which can happen for many reasons. Whether you’re having financial difficulties or you’re searching for a better offer, here are a few ways to find cheaper homeowners insurance:

  • Figure out how much insurance you need. Generally, your dwelling coverage should cover the cost to rebuild your home, while liability insurance should cover what you could lose in a lawsuit. Personal property coverage is usually based on a set percentage of your dwelling coverage, but you can typically buy more protection.

  • Comparison shop. Shopping around to compare rates can help you find an affordable homeowners insurance policy. Certain insurers may have cheaper premiums for the same policy and offer more customization options that allow you to reduce your cost.

  • Look for discounts. Insurance companies typically offer various discounts on homeowners insurance that can help drive down the price of your premium — as long as you qualify. For instance, you can “bundle the [homeowners insurance] plan with the same [insurer] as your auto,” Tucker says. “The home/auto bundle is the largest discount most [insurers] offer.”

  • Choose a higher deductible amount. You may be able to reduce your monthly premium by agreeing to pay a higher deductible, the out-of-pocket cost you pay when filing a claim. If you choose to raise your deductible, be sure you can afford it if you actually need to file a claim.

See More: What Is Personal Liability Homeowners Insurance?

Force-placed insurance FAQs

Here are answers to some commonly asked questions about force-placed insurance.

  • Is force-placed insurance legal?

    Yes, force-placed insurance is legal. Lenders can buy a homeowners insurance policy for a borrower if the policy is canceled, lapses, or doesn’t include sufficient coverage.

  • Are there advantages to force-placed insurance?

    The main advantage to force-placed insurance is that it exists at all, according to Stacy Tucker, a State Farm insurance agent. “The alternative is no insurance at all — and all the risks inherent in that situation.”

  • What if your lender wrongfully applies force-placed insurance?

    It’s possible that your lender may improperly buy force-placed insurance for your home when you have sufficient coverage in place. In this case, you can send the servicer a Qualified Written Request or a Notice of Error, both of which are letters that tell your servicer it made a mistake on your account.[7] The servicer is required by law to fix the mistake within a certain time period.

  • Why is force-placed insurance expensive?

    Force-placed insurance is typically more expensive than traditional homeowners insurance because the lender chooses the policy and coverage options, and it’s not required to select the lowest price. The lender is motivated to protect its own interests — not the borrower’s.

  • How can you avoid force-placed insurance?

    You can avoid force-placed insurance by buying a homeowners insurance policy that meets or exceeds your lender’s minimum requirements. Keep a copy of your policy in a safe place so you can provide proof of coverage if asked. Your lender can tell you the minimum amount of insurance you need, while an insurance agent can help you figure out if you should carry additional coverage.

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Sources

  1. Consumer Financial Protection Bureau. "§ 1024.37 Force-placed insurance.."
  2. Consumer Financial Protection Bureau. "What is force-placed insurance?."
  3. National Association of Insurance Commissioners. "Lender-Placed Insurance."
  4. Consumer Financial Protection Bureau. "§ 1024.37(b) Force-placed insurance.."
  5. Consumer Financial Protection Bureau. "§ 1024.37(e)(4) Force-placed insurance.."
  6. Consumer Financial Protection Bureau. "What is a Qualified Written Request (QWR)?."
  7. Consumer Financial Protection Bureau. "How do I dispute an error or request information about my mortgage?."
Kim Porter
Kim Porter

Kim Porter is a writer and editor who's been creating personal finance content since 2010. Before transitioning to full-time freelance writing in 2018, Kim was the chief copy editor at Bankrate, a managing editor at Macmillan, and co-author of the personal finance book "Future Millionaires' Guidebook." Her work has appeared in AARP's print magazine and on sites such as U.S. News & World Report, Fortune, NextAdvisor, Credit Karma, and more. Kim loves to bake and exercise in her free time, and she plans to run a half marathon on each continent.

Danny Smith
Edited byDanny Smith
Photo of an Insurify author
Danny Smith
  • Licensed auto and home insurance agent

  • 4+ years in content creation and marketing

As Insurify’s home and pet insurance editor, Danny also specializes in auto insurance. His goal is to help consumers navigate the complex world of insurance buying.

Featured in

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