Digital Library: Homeowner Tactics and Remedies When Insurance Is Force-Placed

By: John Rao

November 18, 2024 — Article

When a homeowner fails to purchase hazard insurance on their home, lets the coverage lapse, or purchases a policy not meeting the loan agreement’s minimum coverage standards, the mortgage holder typically has the right to purchase hazard insurance on the property and charge the homeowner for the insurance cost. This force-placement also can occur when the mortgage servicer mismanages the homeowner’s escrow account.  Force-placed insurance is almost always a bad deal for the homeowner and may be associated with several abuses. To make matters worse, the dramatic increase in climate-related disasters and the cost of insurance has led to a dramatic growth in force-placed insurance problems. 

This article begins with an exploration of force-placed insurance abuses, why homeowners should avoid force-placed insurance, and why force-placement has become far more common today. The article then surveys homeowners’ best options and RESPA rights and remedies to resist charges for force-placed insurance.