Mortgage lenders invest large sums of money to underwriting home finances for many types of borrowers. These home buyers are usually required to purchase property insurance to protect the investment against damages and losses due to things like theft, fire and certain types of weather events. Some borrowers have to purchase mortgage insurance in order to secure the loan and guarantee protection against non-payment. As a lender, this might not be enough coverage to give you peace of mind about your investment.
What Is Forced Placed Insurance?
Forced placed insurance, which is also known as force place or lender-placed hazard and flood coverage offers lenders a special type of protection for their investments. What if the buyer defaults on a loan and the home is foreclosed? Their homeowner’s insurance policy, if applicable, won’t cover the property, but a forced placed policy can immediately address this apparent insurance lapse with a variety of coverages:
- Flood and earthquake events
- Wind and hail storms
- General liability
- Builder’s risk
What Else Do I Need To Know?
Forced placed policies will cover the balance on a mortgage loan as well as the original property value. Traditional property insurance tends to cover up to only 80% of the replacement cost. You’re in the business of making money by helping buyers finance their home purchases. It can be a risky business without forced placed coverage to help protect your interests.