What is “Forced Insurance”
Posted on | September 3, 2009 | No Comments
When you purchase your home you are required to keep home owners insurance on the property until the mortgage is paid in full. This is a part of the mortgage note you sign at closing. However, the mortgage company is not responsible for finding you insurance; that is your responsibility and a part of the closing requirement. That is why everyone has insurance on their property when the home closes. However, there are times that you either loose or choose to drop your coverage and that is when “forced” insurance takes place.
Because you have lost your current insurance coverage and let your policy lapse or canceled your insurance coverage and not replaced it with another policy, the mortgage company has the right (actually, the obligation) to place an insurance policy on the property on your behalf. Most of the time this insurance is far more expensive than the policies you could personally get so you will either receive a bill for the policy or your monthly payment will go up to absorb the increase. Either way you are either bound to pay for this policy or immediately get a replacement. If you don’t, you will owe the mortgage company the difference in your escrow account and it will just build up like plaque on your teeth and will be more painful down the road to deal with than if you deal with it as soon as you see there is an issue.
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