Buying a home comes with responsibilities, one of which is securing homeowner’s insurance. In Florida, where hurricanes and tropical storms are a common occurrence, having insurance coverage for your home is essential. But can a lender force homeowners to obtain insurance?
What You Need to Know about Force-Placed Insurance
There are no explicit laws that empower lenders to force homeowners to purchase insurance. However, there’s a catch. Most lenders require borrowers to have homeowner’s insurance as a condition of the mortgage. This is stipulated in the mortgage agreement, and failure to comply with this condition can result in serious consequences.
If you refuse to purchase homeowner’s insurance or allow your coverage to lapse, you’re technically in violation of your mortgage agreement. Lenders can respond by purchasing a policy on your behalf, known as force-placed insurance, and adding the cost to your monthly mortgage payment. Force-placed insurance is typically much more expensive and offers limited coverage compared to a policy you would choose yourself.
One of the most utilized force-place insurance actions in the state of Florida is for Flood Insurance. In Florida, it is not uncommon to be unaware of your requirements regarding flood zones and mandatory needs for flood insurance for zones A and E. This can be especially true at condo associations, where communication sometimes isn’t perfect. At our office, we remember zones A and E by associating them with the words Always and Expensive! So, if you are in zone A or E, be sure to have a flood insurance policy in place, or else your lender will do it for you at a rate you will not be happy about.
It’s crucial to understand that while lenders cannot directly force you to buy insurance, they can make it a contractual obligation. Failing to meet this obligation can lead to financial strain and a potential threat to your homeownership.
The Law Office of Donna Hearne-Gousse can help you with information on force-placed insurance and any other real estate transaction. As a real estate attorney in Royal Palm Beach, we actively represent buyers and sellers for title services, closings, and all of your real estate needs.
The Law Office of Donna Hearne-Gousse