Loanfactz Definitions

Forced Placed Insurance

If the lender discovers that you have no car insurance on your vehicle or the required property insurance on your home, they will take out a special policy to cover the vehicle loan or home mortgage loan they approved for you. This kind of insurance is very expensive and it provides less coverage. The primary purpose of a force placed policy is to protect the lender, not the owner. The lender will add the premium costs of the new vehicle or home insurance policy to your loan, and you must pay it, so make sure you get your own vehicle insurance coverage or homeowners insurance coverage you need.

Review all correspondence you receive from your lender. Your lender may request that you provide a copy of your insurance policy. Respond promptly to requests regarding insurance, and keep copies of all documents you send to your lender.

If you believe there's a paperwork error and that your coverage is adequate, provide a copy of your insurance policy to your lender. Once the lender corrects the error, removes the force placed coverage, and refunds the cost of the force placed policy, make sure that any late fees or interest you were charged as a result of the coverage also are removed.

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