Did you know that if you borrow money to buy your car or home and let your insurance policy lapse (cease to exist/end), your loan agreement may give the lender the right to obtain insurance for you and require you to pay the premium? This type of insurance coverage is called "lender-placed" or "force-placed" insurance. Often times, the premium for forced-placed insurance is substantially higher than it would be if the property owner obtained coverage directly from the insurer. And even though the lender will bill you for the premiums due under the policy, the coverage only protects the lender's financial interest in the property.
Force-placed or lender-placed policies are typically also very limited in the scope and amount of coverage. For example, some policies only cover the amount of the outstanding balance on the loan. For force-placed policies covering a home, damage to the dwelling may be covered only if caused by specific causes of loss, and generally, there is no coverage for your personal property.
Here are a few tips on what you can do to protect yourself as a consumer:
For more information on how to compare the price of insurance for your car or home, refer to our rate comparison guides available under the For Consumers tab at the top of this page.
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