Force placed insurance is insurance placed by a financial institution when a home or vehicle owner has failed to obtain insurance or allowed a policy to lapse.

This type of coverage is also called lender-placed, creditor-placed, or collateral protection insurance.

Possible Reasons for Lack of Insurance Coverage

  • An owner with a low credit score might have trouble obtaining insurance.
  • The policyholder failed to renew insurance during the allowed timeframe.
  • Owners with homes in high-risk areas for events such as floods, earthquakes, or wildfires may find it hard to get coverage.
  • Insurance companies may refuse to cover homes that have not been maintained with proper upkeep or do not meet current building codes.

How it Works

Force placed insurance protects the lien holder, home or vehicle owner, and the property itself. The policies cover the amount due to the lender and typically will not cover personal property or liability.

A financial institution can force-place coverage on a property for a variety of reasons. Lenders might do this if they haven’t received proof of insurance from the owner. They may also instate a lender-based policy if the owner’s coverage does not meet the bank’s minimum requirements.

Financial institutions take on a variety of risks when lending. Force placed insurance helps protect their economic interests.