Ready to say goodbye to student loan debt for good? Learn More
2020 Best Invention

8 Reasons You Could Face Force-Placed Insurance

3 minute read Upsolve is a nonprofit tool that helps you file bankruptcy for free. Think TurboTax for bankruptcy. Get free education, customer support, and community. Featured in Forbes 4x and funded by institutions like Harvard University so we'll never ask you for a credit card. Explore our free tool

In a Nutshell

Force-placed insurance is a home insurance policy that a lender or loan servicer places on a borrower’s property. Mortgage providers may do this if they find that the homeowner no longer has an active insurance policy or if they believe that the homeowner’s insurance does not adequately protect the property. This article explains what force-placed insurance is and the impact it can have on borrowers.

Written by Attorney Todd Carney
Updated May 11, 2023

Taking out an insurance policy is crucial to protect your home. While homeowners typically purchase insurance for their own home, sometimes the lender will purchase insurance on a borrower’s behalf. This is called force-place insurance. 

Lenders or loan servicers can take out a force-placed home insurance policy when the homeowner’s own insurance coverage has lapsed or when the homeowner’s insurance provides less coverage than the lender requires. Force-place insurance is expensive. Its primary function is to protect the lender’s interest in the property. When the lender buys force-placed insurance, they pay for it by charging the borrower more for their mortgage payments.

Mortgage providers have been using force-placed insurance more recently than they did in the past. This has caused insurance regulators to review how mortgage lenders and insurers are using force-placed insurance.

This article explains what force-placed insurance is and the impact it can have on borrowers.

What Is Force-Placed Insurance?

Force-placed insurance is a home insurance policy that a lender or loan servicer places on a borrower’s property. Mortgage providers may do this if they find that the homeowner no longer has an active insurance policy or if they believe that the homeowner’s insurance does not adequately protect the property. This is sometimes called lender-placed insurance, creditor-placed insurance, or collateral protection insurance. Under federal law, a lender has to notify a homeowner at least 45 days before purchasing force-placed insurance.

When you take out a mortgage, you don’t own your property outright. The lender has an interest in the property, which is why mortgage contacts require borrowers to carry a homeowners insurance policy to protect their home. Not having this insurance can cause you to default on your mortgage. The mortgage loan documents also typically state that if the homeowner’s insurance policy lapses or the homeowner cancels the policy, the lender has the right to force place an insurance policy and pay for it by charging the homeowner more on their mortgage payment.

Premiums Are Higher

Typically, the premiums for lender-placed insurance are a lot higher than the insurance premiums for personal policies. Despite this, force-placed insurance usually covers a lot less than the insurance borrowers purchase to protect their homes. It’s there mostly to protect the lender. Because of this, force-placed insurance doesn’t provide liability coverage or cover personal items. Instead, it generally just covers what’s left to pay on the mortgage loan.

If the homeowner does have insurance or doesn’t pay the force-placed insurance premium, then they could end up defaulting on their mortgage loan, which gives the lender the right to foreclose.

Upsolve User Experiences

2,071+ Members Online
Lee Powers
Lee Powers
★★★★★ 7 hours ago
The last thing that you want to do, when you can’t pay those ridiculous credit cards, is to pay an attorney$$$$ to help to not pay those cards. This is where this organization comes in. If you look up all the paperwork that goes into filing a Bankruptcy Case it will blow your mind! Questions quickly come up like …What do I need / What don’t I need. So because my Brother had just filed $2000 with an attorney. He discovered after about this Upsolve organization, and let me say… it is a very good thing. You answer a bunch of questions it takes a while and then after they have there team Kind LAWYERS look at it couple weeks, you print out and sign and file it, I mailed it into the Court. It is important to follow their checklist, which includes the credit counseling, that all Courts Require. Thank you 🙏 Upsolve Team
Read more Google reviews ⇾
Connor Norris
Connor Norris
★★★★★ 1 day ago
thanks guys. what an amazing service. its inspiring in that its free and ultimately for the benefit of all.
Read more Google reviews ⇾
Erin Brianne
Erin Brianne
★★★★★ 1 day ago
very helpful. i couldn't have filled all that paperwork out on my own
Read more Google reviews ⇾

Why Would a Lender Add Collateral Protection Insurance?

Sometimes a lender or loan servicer may also take out hazard insurance on the property. They may do this if:

  • There’s no homeowners insurance policy on the real estate either because the borrower didn’t purchase a policy or they didn’t renew their insurance or to take out another policy.

  • The lender doesn’t have proof of insurance from the borrower, despite the fact that the homeowner does have insurance coverage.

  • The homeowner has a policy, but the lender considers the kind or amount of coverage insufficient.

  • The property is subject to extreme risks like flooding or earthquakes, and the homeowner can’t find an insurance agent who will cover them.

  • The homeowner has filed several past insurance claims (fraudulent or valid) and can’t get an insurer to cover them. In this case, the lender may then add collateral protection insurance.

  • The borrower has a low credit score, so insurance companies aren’t unwilling to provide coverage.

  • The home or structures on the property are old and haven’t been kept up to date, so insurance companies deem them to be too risky. 

  • The property owners have vicious animals or keep livestock, and this prevents them from getting insurance coverage.

Lender-Placed Insurance Is Becoming More Common

Since lender-placed insurance has become more common recently, many state regulators have begun looking into it. Regulators are investigating if mortgage companies and insurers are profiting from this practice. Some state regulators are investigating on their own, and others are working as part of an initiative of the National Association of Insurance Commissioners (NAIC) 

If your lender or loan servicer incorrectly purchases lender-placed insurance to cover your home, you should send them a notice of error. If you don’t hear back from them, then you should contact an attorney. It is also helpful to file a complaint with the Consumer Financial Protection Bureau.

Let's Summarize…

Mortgage companies have implemented force-placed insurance more during the last few years. Lenders can take out this kind of policy when the borrower’s personal property insurance has lapsed or if it doesn’t provide coverage that meets the lender’s requirements. 

Force-placed insurance costs more than personal homeowners insurance policies, and it also covers less. The mortgage company pays for lender-placed insurance by adding it to the borrower’s mortgage payment. Given the increased use of this insurance, regulators are looking into its impact.

Written By:

Attorney Todd Carney


Attorney Todd Carney is a writer and graduate of Harvard Law School. While in law school, Todd worked in a clinic that helped pro-bono clients file for bankruptcy. Todd also studied several aspects of how the law impacts consumers. Todd has written over 40 articles for sites such... read more about Attorney Todd Carney

It's easy to get help

Choose one of the options below to get assistance with your bankruptcy:

Free Web App

Take our screener to see if Upsolve is right for you.

Take Screener
12,715 families have filed with Upsolve! ☆

Private Attorney

Get a free bankruptcy evaluation from an independent law firm.

Find Attorney

Learning Center

Research and understand your options with our articles and guides.

Go to Learning Center →

Already an Upsolve user?

Read Support Articles →

Upsolve is a 501(c)(3) nonprofit that started in 2016. Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app. Our team includes lawyers, engineers, and judges. We have world-class funders that include the U.S. government, former Google CEO Eric Schmidt, and leading foundations. It's one of the greatest civil rights injustices of our time that low-income families can't access their basic rights when they can't afford to pay for help. Combining direct services and advocacy, we're fighting this injustice.

To learn more, read why we started Upsolve in 2016, our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal.