If you recently purchased new real estate, your lender may have informed you that they will require force-placed insurance coverages. Force placed insurance can sometimes come as a surprise if you hadn’t heard of it before, but it serves an important purpose in protecting the lender’s investment. Here’s what you should know about the types of coverage you may be getting through this insurance.
Your Coverage Will Likely Be Tailored to Protecting Your Lender’s Interests
Because the reason for force-placed insurance has to do with mitigating your lender’s financial risks, you can expect any coverage to help protect the lender’s interests. For example, if your lender feels there is a significant amount of financial vulnerability involved in offering financing for this piece of real estate, they may require extra coverage in the mortgage lending process.
Your Lender Will Have a Safety Net Against Risks on Your Part
Much of the coverage in force placed insurance will be aimed at protecting against risks on your – the borrower’s – part. For example, your lender may be covered in case you:
- Get dropped by other insurers
- Let your policy lapse
- Stop paying your annual premiums for other coverage
- Cannot get the property otherwise insured
Though it might be a new term to you, force placed insurance coverages offer important protections to your lender and the real estate you’ve just purchased. These quick facts can help you understand the types of coverage you could be getting through force placed insurance.