Lender-placed (or force-placed) insurance is coverage that a mortgage lender or bank purchases for property to protect its interests when the homeowner fails to purchase this coverage. This often occurs during abandonment and foreclosure but can  also  occur if the  homeowner simply misses his payment schedule or is under-insured.

The premium cost for this insurance is usually higher than a conventional homeowners’ premium, and this cost is passed on to the homeowner, frequently added to the loan balance. The premium is based on the loan balance and only covers the loan amount. It does not cover any damage to the property.

The high premium costs and the fact that homeowners are often “forced” to pay for this coverage by the lender has increased the attention for this type of insurance. Fannie Mae and Freddie Mac guarantee a large portion of the mortgage market and are in the process of revising their rules to require admitted carriers and not surplus lines carriers to insure this business.

Excess/surplus line carriers are not covered by the Florida Insurance Guaranty Association whereas admitted carriers are backed by the Association.

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