Top 3 Forced Insurance Plans And How To Beat Them


It's Easy To Beat These 3 Forced Insurance Plans

You want to protect your home; it’s one of the biggest investments of your life. Losing or damaging your home could mean big bills that you can’t pay. The lender you received your home loan from also has a vested interest in your purchase, so much so that they can—and often do—force you to purchase insurance for your home. But in when can a lender force you to purchase insurance? There are three main cases. If your insurance has lapsed without payment, your lender will implement forced insurance to maintain the house. Homeowners that live in a flood zone and do not have a large enough policy to cover their homes will also have to purchase additional flood insurance, which is enforced by the government and the lenders. Condominiums, too, have forced insurance plans. Condo owners with a Homeowner’s Association (HOA) insurance policy will also be required to purchase H06, or “walls in insurance.” Here's more information on the top 3 forced insurance plans and how to beat them. SEE ALSO: Mudslide and Landslide Insurance

1. Force-Placed Insurance

Any human being is prone to forgetfulness, but when you forget to pay your home insurance bill, it can cost you dearly. Force-placed insurance plans are often more expensive than your own home insurance plan because the lender does not research plan options like you do. Instead, he slaps a generic plan on your bill which will fulfill his needs. This form of insurance has come under scrutiny lately for giving lenders “kickbacks,” but has yet to be repealed. Avoiding a force-placed plan is simple: all you need to do is get a plan that covers all the lender’s requirements and pay it on time. If a lender has placed insurance on you unjustly, you can dispute the plan through a Qualified Written Request (QWR) sent to your lender. However, you'll need to keep paying the force-placed insurance. If the insurer was incorrect in making you pay this insurance, he will have to send you the sums you paid back.

2. Flood Insurance

Potential home buyers are usually educated on whether or not a home they are looking at is on a floodplain. But, because floodplain zoning changes with each flood season, homeowners on floodplains are not always aware of this information. That’s when the insurer comes in. “If a home is appraised and the appraiser marks that the home is in a High Risk area for floods, then they would require flood insurance,” said Bill Hierl, Senior Advisor at Journey Financial, a direct loan lender and home loan advisor. Unfortunately, adding on flood insurance is a requirement for homes in flood zones. Just like any other insurance plan, your best bet is to search for home insurance on your own to replace the plan your lender will implement. Once you have found a reasonable plan, submit the proof of insurance to your lender so you will stop getting billed for their plan.

3. Condo Insurance

Just as conventional home insurance does not cover floods, your HOA insurance will not cover the interior of your condo. An insurer’s drive to protect his investment meddles in your business again by requiring you to purchase H06 insurance. H06 insurance policies cover the interior of your home. “They really aren’t very expensive,” Hierl said. He estimates that for a $300,000 loan, the plan would costs about $25 per month. Here, too, it is important to shop around for the best home insurance. Most large insurance companies, as well as some city-based companies, offer an H06 plan. If you are thinking of purchasing a condominium, search for plans before you buy, so your lender does not tack on an expensive plan. SEE ALSO: Insuring A Townhouse Vs. A Condo
Date of original publication:
Updated on: November 10, 2015

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