Force-Placed / Collateral Protection Insurance

Also known as creditor-placed, lender-placed, or collateral protection insurance, force-placed insurance policies are put in place by a lender, bank, or loan servicer on a home when the property owner's insurance is somehow insufficient. This may include instances such as the property owner's insurance being cancelled or lapsing, or simply being deemed insufficient to cover the value of the property. In this way, the lender protects their own financial interest in the property independent of the owner. Flood insurance may be force-placed on homes in flood zones if the lender does not believe the existing coverage is sufficient as well.

More often than not, these force-placed policies contain limited coverage and are relatively expensive; if you are under a force-placed policy, it is highly recommended that you either seek to reinstate your previous policy or purchase a new policy from an insurance carrier and request the lender cancel the force-placed policy as soon as your new policy becomes effective.