What is force-placed insurance?

Force-placed insurance is an insurance policy that can be placed on a home when the borrower's policy is canceled, lapses, or is deemed insufficient by the lender.

Pat Howard 1600Kara McGinley

By

Pat Howard

Pat Howard

Senior Editor & Licensed Home Insurance Expert

Pat Howard is a senior editor and licensed home insurance agent at Policygenius, where he specializes in homeowners insurance. His work and expertise has been featured in MarketWatch, Real Simple, Fox Business, VentureBeat, This Old House, Investopedia, Fatherly, Lifehacker, Better Homes & Garden, Property Casualty 360, and elsewhere.

&Kara McGinley

Kara McGinley

Editor & Licensed Home Insurance Expert

Kara McGinley is an editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN, WRAL.com, and elsewhere.

Updated|2 min read

Policygenius content follows strict guidelines for editorial accuracy and integrity. Learn about our editorial standards and how we make money.

Force-placed insurance, also known as “creditor-placed” or “lender-placed” insurance, is insurance acquired on your behalf by your bank or mortgage server. Your bank or mortgage servicer may get force-placed insurance to secure their investment in the property if your homeowners insurance policy is canceled, lapses, or is determined to be insufficient and you don’t secure a replacement policy.

Force-placed coverage usually doesn’t include protection for your personal belongings or personal liability, and it’s typically more expensive and not considered a viable replacement for a standard homeowners insurance policy. [1]

Key takeaways

  • Before taking out a home mortgage, your lender will require you to get homeowners insurance.

  • If your policy lapses or is canceled for any reason and you fail to get the policy reinstated or replaced, your lender may purchase coverage on your behalf.

  • Force-placed insurance is more expensive and has more limited coverage compared to standard homeowners insurance.

Ready to shop home insurance?

Start calculator

What is force-place insurance?

Force-placed insurance is a type of insurance policy acquired by a mortgage lender. As the name implies, your lender can “force” their own insurance policy on your property if your homeowners insurance is canceled or your policy lapses. 

A mortgage company may do this because as the lienholder they have a financial interest in making sure that your home is adequately protected against damage from fire, windstorms, and other perils that could cause damage to your home.

Mortgage lenders require you to have enough homeowners insurance to cover a full rebuild of the property

This means you’ll need enough homeowners insurance coverage to pay to fully rebuild your home from the ground up in the event of a disaster. Lenders may also require flood insurance if your home is located in a high-risk flood zone.

How does force-place insurance work?

With force-placed insurance, the lender pays the policy premiums up front and the balance is then added to your monthly mortgage bill. If you pay for property taxes, mortgage insurance, and homeowners insurance through your escrow account, your lender will likely streamline your payments from there. 

Keep in mind that your monthly mortgage payment could increase significantly once your lender places insurance on your property.

Force-place insurance has drawn the ire of borrowers and insurance regulators in recent years

The controversy stems around how much is being charged for lender-placed insurance and whether insurers and mortgage servicers are making excess profits off of the inflated cost of coverage, according to the NAIC. Lenders aren’t motivated to select the lowest price policy for borrowers, which makes the force-placed insurance system rife with abuse. 

Ready to shop home insurance?

Start calculator

How much does force-placed insurance cost?

Force-placed insurance costs around one-and-a-half to two times as much as a standard homeowners insurance policy, according to Assurant, a leading writer of lender-placed insurance policies. [2]  

The average cost of homeowners insurance is $1,899 per year, so you could end up paying nearly $3,800 yearly for force-placed insurance. And in some situations, it could even cost ten times as much as standard homeowners insurance coverage, according to The National Consumer Law Center. 

Why is force-placed insurance so expensive? 

Lender-placed policies cost more because homes generally aren’t held to the same underwriting criteria as voluntary home insurance. Most force-placed insurance companies have an agreement with partnering mortgage companies to insure every lapsed property without conducting an inspection or analyzing the loss history of the home. Additionally, many homes are uninsured specifically because they’re located in natural disaster-susceptible areas where affordable insurance is scarce.

What does force-placed insurance cover?

Force-placed insurance is significantly pricier than insurance a borrower can purchase on their own, however the coverage itself is far worse. Policies are geared toward protecting the lender’s investment — not the homeowner. That means any personal belongings of the borrower — like clothes, furniture, jewelry, and electronics — aren’t covered by a lender-placed policy. Force-placed insurance doesn’t include personal liability coverage either, which is a crucial component in a standard homeowners policy.

How to remove force-placed insurance

If your lender places force-placed insurance on your property, here are a few things you can do. 

  • Contact your loan officer or mortgage servicer. Ask your loan officer what you need to do to get your old policy reinstated. It’s possible that your lender placed insurance on your home by mistake, but even if that’s the case you should continue paying the policy premiums until the situation is resolved.

  • Gather documents. Once you have a new policy — or if you already had a policy and the force-placed coverage was purchased by mistake — gather all necessary documents, like a home insurance binder or declarations page, to send to your lender as proof that your home is covered. 

  • Wait for cancellation of force-placed insurance. Once your lender has proof of adequate coverage on the home, they’re legally required by the Consumer Financial Protection Bureau to cancel your force-placed insurance within 15 days and refund any unused premiums. 

Ready to shop home insurance?

Start calculator

How to save on homeowners insurance

To avoid a lapse in coverage or non-renewal of your homeowners insurance, it’s important you have a policy you can afford. Here are a few ways you can keep homeowners insurance costs down. 

  • Shop around. It’s recommended that you re-shop your homeowners insurance annually to make sure you aren’t missing out on a better deal elsewhere. Policygenius agents can help you shop multiple companies at once to compare quotes. 

  • Ask about discounts. Most major insurance companies offer a variety of discounts, like discounts for installing safety features like burglar and fire alarms and for installing a new roof. 

  • Consider bundling your home and auto policies. Another major discount most insurers offer is a multi-policy discount — sometimes up to 35% off. 

  • Raise your deductible. The price of your deductible is directly related to the price of your homeowners insurance premiums. The higher your deductible is then the lower your premiums will be — just make sure you keep it at a price you can afford to pay in the event you need to file a claim.