For Consumers

Force-placed insurance

What is it?

This is insurance your lender takes out when you finance property, such as a home or car, and you don’t have insurance for it.

The most common types of force-placed insurance are for autos and homes, but it can also apply to boats, RVs, motorcycles and mopeds, as well as commercial equipment, vehicles and property.

Why your lender will require it

Lenders take out force-placed policies to protect their investment in case your financed property gets damaged or destroyed. Without this insurance, lenders might be unable to recover the loan balance if a loss occurs.

Who provides it?

The lender obtains the coverage to protect them, not you, against loss.

If you’re a borrower without your own coverage, you’re considered a higher risk. Premiums for force-placed coverage are typically much higher than standard insurance premiums. These higher costs get passed along to you, which increases the amount of your loan payments.

How to avoid it

Buy your own insurance coverage and add the lender to your policy as a lien holder. Then you or your insurance agent can supply your lender with a copy of your policy declarations page. This verifies you have insurance coverage and shows you’ve listed them as a lien holder.