Have you recently been notified that your insurance policy will require additional lender placed insurance and wondered what this extra coverage entails? In a nutshell, lender-placed coverage fills in the gaps when the insured party does not have adequate coverage already. To understand this insurance type better, take a look at these fundamentals.
Lender-Placed Coverage Protects the Lender When Homeowners Fail To Secure Adequate Insurance
The most common scenario where lender-placed coverage applies is when homeowners do not have adequate insurance already in place. By “inadequate insurance”, lenders may mean that a homeowner has:
- An expired or canceled insurance policy
- Missed premium payments
- An inability to secure insurance due to property risks such as earthquakes, fires, flooding, high crime rates and more
- Partial or inadequate coverage
- Dropped or withdrawn coverage on the part of the insurer
Your Policy May Depend on Your Lender’s Specific Needs
Despite the umbrella-sounding name, lender-placed coverage can vary widely depending on a lender’s specific needs. Some common examples of this insurance include:
- Real estate portfolio coverage for both commercial and residential property
- Replacement cost compensation in the event a property is seriously damaged
- Coverage for common liabilities, including natural disasters and certain business-related risks
Having lender placed insurance may seem confusing at first, but these fundamentals can help you reach a deeper understanding. With this coverage, the lender receives additional protection that can help to lower overall insurance risk.