There is no doubt about it; force placed insurance is serious business. The law demands servicers have a reasonable basis to believe a homeowner lacks proper insurance before they can purchase a force-placed policy. While the following signs don’t always mean there is a contractual failure, they are good reasons to request proof of insurance and consider your options.
1. Dangerous Location
The often-quoted keys to real estate, “Location, location, location,” apply here as well. If the property in question is in an area prone to natural disasters, homeowners may have difficulty finding insurance. This also applies if a home is in a neighborhood with a high crime rate.
2. Home Condition
A dilapidated or unmaintained house means an insurance company is less likely to onboard homeowners. Homes in states with new building codes also fall into this category. Many properties simply fail to meet changing codes right away, and this is enough risk for some insurance companies to dismiss a borrower.
3. At-Risk Homeowners
No matter the home or location, some borrowers will face increased difficulty finding appropriate hazard insurance. If a borrower has a low credit score or fraudulent insurance claims in their history, finding enough insurance might be a challenge for them.
Servicers protect themselves and homeowners when guaranteeing insurance is in place. Do not hesitate to obtain insurance confirmation when needed, because when a property is underinsured, servicers do everyone involved a favor by purchasing force placed insurance.