When you sign up for a mortgage, you agree to insure your home to protect against damage or loss. This is a requirement of every mortgage agreement, whether your mortgage is with Greylock or any other lender. If for any reason you fail to maintain adequate insurance coverage on your property, the lender will purchase insurance on your behalf to protect its interest in the property. This is called force-placed insurance (FPI).

 “If your insurance lapses, maybe you forgot to pay the premium or canceled your policy, your lender will add force-placed insurance  coverage, also called lender-placed insurance, to your loan,” said Tara McCluskey, vice president and mortgage originations manager at Greylock. “FPI is meant to make sure the property is still covered, to protect the lender’s interest in your property.”

How It Works
  1. Notification: If your insurance lapses, your lender will send you a notice to fix it. You’ll usually get some time (a few weeks or months) to buy or renew your policy.
  2. Force-placed coverage: If you don’t act, the lender will buy a policy on your behalf and add the cost to your loan payments.
  3. Higher bills: You will start seeing those extra costs in your monthly loan payment or as a separate charge.

While it sounds straightforward, FPI is usually more expensive than a standard policy, and it might not cover things like your personal belongings in your home or liability if someone gets hurt on your property. It only covers the balance of your mortgage to protect the lender.

Here’s how you can avoid force-placed insurance:

  1. Stay on top of payments: Make sure your insurance premiums are paid on time.
  2. Update your lender: If you switch insurance providers, let your lender know right away.
  3. Pay attention to notices: If you get a letter about your insurance, don’t ignore it.
What to do if force-placed insurance is added

If your lender has already added force-placed insurance to your loan, here’s what you can do:

  1. Check the details: Call your lender and confirm why it was added.
  2. Buy your own policy: Get a regular insurance policy that meets your lender’s requirements. McCluskey recommends talking to Greylock Insurance Agency (GIA) for more information.  “As an insurance agency, they can work with multiple carriers to find you the best coverage.” Visit www.greylockinsurance.com for more information.
  3. Request a refund: If you buy coverage retroactively, you may be able to get back some of the force-placed insurance charges.
The bottom line

As a borrower, you want to ensure you’re protected on your terms, so stay on top of your policies, and be sure to respond to any notices from your lender.