Avoid placed home owners insurance
Posted on October 7, 2007
Filed Under Home Finances |
What is “placed insurance”? Very simply, it is when your mortgage company or lending bank purchases home owners insurance for your house and makes you pay for it. It is usually very expensive.
“How could they do that?” you ask.
It can occur when your own insurance company drops you or you otherwise fail to get your own insurance. The terms are spelled out in the middle of the 30 page document you signed at closing when you purchased your property.
It happened to me one year. It was a very bad insurance year for me. I had 5 different insurance companies for various reasons (another story for another time). One of them was placed by my lender upon notification from the insurer that I was no longer covered. The cost was over $3,000 per year. That is 300% of the amount I am paying now - for the same house!
Placed insurance is not a good thing. Not only is it a higher cost, but the coverage is pitiful. It provides nothing for the benefit of the owner and pays the lender in the case of a fire or other severe loss or damage. Likely your lender will begin billing you separately after a few months; or you might start receiving a bill from the insurance company itself. Otherwise, if they start rolling the insurance into your mortgage balance for you to pay at the end, it could add years to the life of your loan as well as add tens of thousands of dollars to what you would have paid my maintaining your own insurance.
Avoid placed insurance by being proactive on your renewals or new policies, and by keeping your credit clean. Unfortunately, credit glitches and prior claims and rumors of claims are used against you.
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