For Consumers

Lender-placed insurance

Lender-placed insurance is an insurance policy placed on property you finance, such as a home or car, when you don’t have insurance for it.  

What is it? 

Most lenders will require that you have an insurance policy on any property that you finance.. The lender will place their own insurance policy on the property if you don’t prove that you have purchased your own. These policies are known as force-placed or lender-placed insurance policies. 

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.