Definition
Force-placed insurance is an insurance policy a lender buys for your home if your homeowners insurance lapses. This insurance protects the lender's interest, but it is typically more expensive than what you could get yourself.
Understanding Force-Placed Insurance
Force-placed insurance enters the picture if a homeowner's required property insurance lapses or is canceled. In simple terms, it’s the lender's way to protect their investment by ensuring the property is insured. This type of insurance is often more expensive than policies homeowners might choose themselves. Example: If a typical homeowner's policy costs $1,500 annually, a force-placed policy might cost $3,000. It's not a replacement for a homeowner's personal policy and doesn't cover personal belongings or liability. Many believe it covers all aspects of home insurance, but it primarily protects the lender's interest, not the homeowner's personal needs.
