What is a force placed policy?
Of all the insurance policies we see every day, the force placed policy is the most difficult to deal with, both for us and for you. This is because it’s a policy purchased by the mortgage company, for the mortgage company, when the homeowner fails to insure the home themselves.
What happens when your home is damaged
A force placed policy is essentially home insurance for your mortgage company, not for you. While you’re named on the insurance, you’re likely only named as the “borrower”, not the “insured”. This means that any benefits paid out by the insurance company go straight to your mortgage company.
In addition, the policies are often taken out only for what is owed on the mortgage and not the value of the cost to replace the home. This means if the house burns down, the mortgage company will collect what is owed on the mortgage and move on, leaving you with no home, no chance for the home to get rebuilt, and no settlement to move forward with. These policies are really meant to protect the bank’s own money more than they are to protect the house or the homeowner.
In short, if you have a forced placed policy and can afford to get private insurance, do it immediately. These are the worst types of policies to have, as they are meant to protect your mortgage company against you.
Homes likely to have a force placed policy
Most homes with these policies are those in foreclosure. When a homeowner fails to pay their mortgage, they fail to pay their premium, which puts the mortgage company at risk. Therefore, the mortgage company steps in to take care of their property.
This is not a pleasant sight to see, as homeowners in foreclosure watch their mortgage company take their home away at the same time as they collect the insurance benefits.
If you’re not sure if you have a private home insurance policy or a force placed policy, confirming is as easy as looking at your insurance company. The most common force placed policies are from Balboa, QBE, or American Security/Assurant. If you’re still concerned, knowledge is only a Google search away! This should be simple enough: most force placed insurance companies are owned by the home’s mortgage company.