To protect their financial interest in the property, mortgage lenders require homeowners to carry home insurance. This policy helps protect both lenders and homeowners against a covered event. If you cancel your coverage or your insurer chooses not to renew your policy, your lender will be notified. You should maintain an adequate level of coverage to avoid foreclosure or forced-placed insurance. Here’s detailed information on this topic.
You Might Lose Your Mortgage
You can lose your mortgage if your home doesn’t have insurance coverage. One of the conditions that come with mortgages is that your insurer can foreclose on your house if you fail to have insurance coverage. However, the lender is likely to buy the insurance and add the premiums to your mortgage payment. If you’re struggling financially, it can be more difficult for you to make mortgage payments.
Know Your Mortgage Requirements
Your mortgage lender might require a given level of hazard insurance on your home. You must ensure that you carry that level of insurance coverage to protect your lender’s interest, or else you might default on your loan.
Changing Insurance Providers
You can change insurers because your homeowners’ policy is in your name. Your insurer may also choose not to renew the policy. If your policy won’t be reviewed, you and your mortgage lender will be notified 30 days before your policy’s expiration. In this case, get a new insurance policy from another firm that will kick in on your previous policy’s cancelation date. You should then give your lender the new policy’s declarations page.
Get a CLUE Report
The insurance claim history of all policyholders is documented in the Comprehensive Loss Underwriting Exchange (CLUE) Report. Insurers use these reports to assess your risk and can deny you coverage due to your claims history. You can get your annual CLUE report from LexisNexis Risk Solutions.
Look for High-Risk Plans
You may struggle to get new homeowners insurance if you have a bad claims history. States offer Fair Access to Insurance Requirements (FAIR) plans. These plans offer insurance to high-risk individuals who can’t get traditional insurance. FAIR Plans are often more expensive and come with less favorable terms. Your insurance agent can help figure out if you can get high-risk insurance.
Avoid Force-Placed Insurance
As soon as you get new homeowners insurance, you should inform your mortgage lender. If your lender thinks that you are delaying the process, they will purchase a policy on your behalf. Force-placed or lender-placed insurance rates often cost five times more than standard home hazard insurance. Force-placed policies will also increase your mortgage payment and come with less favorable terms. Lenders typically enact this type of policy immediately after they get a cancellation notice if you don’t provide replacement policy information.
Recurring coverage lapses or refusal to pay the costs that come with lender-placed coverage can lead to your lender issuing a demand letter requiring you to immediately repay the entire due mortgage as well as the insurance expenses incurred by the lender. At this point, you should call your mortgage lender and sort out the issues regarding your insurance. Usually, you have 30 days prior to the beginning of foreclosure proceedings. If you’re having financial issues, you should try to work with your lender in crafting a loan modification that will enable you to afford your mortgage.
At Burton A. Harris Insurance Agency, we can help you get a customized and cost-effective home insurance policy. Contact us today to learn more.a