Forced Insurance

Posted: Tue Oct 06, 2009 02:43 am Post Subject:

WHAAAAAAAT? :? :?: :?:

OK, I'm not confused about how to answer the question, I'm confused as to how this thread got so discombobulated.

HOMEOWNER'S insurance is hazard insurance on the home. This is the coverage for fire and all that other stuff like burglary, windstorm, liability and a boatload of other stuff. This is normally carried by the homeowner and is a requirement as long as a lien exists on the home (with certain rare exceptions). A mortgage company would only place this type of coverage on the home in the event that the lien is still in place.

If you're talking about paying off the mortgage in the event of your death, you're talking about "Credit life insurance." This simply pays off the balance of the mortgage in the event of the borrower's death, therefore giving the heirs free and clear ownership of the home. This coverage is almost ALWAYS voluntary except in rare situations.

If we're talking about protecting the lender's interest in the property in the event the borrower defaults on the loan, that's Private Mortgage Insurance, or PMI. That wouldn't be the case if the borrower owed little on the morgtage.

So, if the OP didn't have homeowner's insurance on the house and the lender found out (which they will), they have the right to place coverage on the home to protect their interests. Think about it...if there's no hazard coverage on the home and it burns down and there's still money owed on the house- what collateral is left to the lender?

InsTeacher 8)

Posted: Tue May 18, 2010 09:36 pm Post Subject: mortgage

I was talking about when you have a mortgage and your property insurance lapses for lack of money. Not life insurance that pays for the loan in case you die.

Posted: Thu May 20, 2010 02:41 am Post Subject:

Hi hummingbird, glad you're still around! I can't believe this thread is still alive, and I still don't think anyone's actually answered your question. I would suggest that you read my last post referencing the homeowner's insurance as that's what you're referring to. I'm sorry that some of the other poster's got, shall we say, a bit distracted? :D

If, as you said, your homeowner's policy (property policy) lapsed because you couldn't afford the premium, then the coverage placed by your mortgage lender was indeed what's called "Vendor's Single Interest" coverage. The "vendor" is the bank, and the "single interest" means that it only protects their (the bank's) interest in the home, which is the amount you still owe on the mortgage. This is the insurance that protects their interest in the event there's a loss to the home as you don't have any insurance that protects the bank 'cuz your insurance lapsed. The premium for this will be added to your mortgage balance and commonly adds to the monthly mortgage payment.

It's perfectly legal, you signed papers for this when you purchased your mortgage that would allow them to take this action, and the policy does nothing for you. Again, think "single interest." It's expensive, only protects the lender, and is almost certainly more expensive than just about anything you can purchase on your own... even if the house or you have insurability problems.

So, I hope that you've started shopping around for coverage. I looked at rates for homeowner's coverage in Kentucky, and the information I found should sound pretty good to you. Ky. ranks #43 in terms of HO premiums, with #1 being the most expensive. The average premium for the coverage is $578 annually and the rate quoted was for a HO3 policy. That's pretty much the standard, really good policy.

That rate ain't bad by any means. But, I must say... my state's better. I live in Oregon and we're #48 with an average annual premium of $496. Nyah Nyah. :D

The above statistical information is courtesy of the Insurance Information Institute: Check out their website at:

http://www.iii.org/index.html

InsTeacher 8)

Posted: Thu May 20, 2010 06:33 am Post Subject:

Hummingbird . . .

Apparently you did not have an impound account to collect and hold additional money with each payment to cover property taxes and insurance.

In the future, you need to set up an account to fund in order to prevent this from happening again. It could be a simple savings account at a bank or credit union or a money market account with the bank or a mutual fund company.

Figure your current expenses for tax and insurance and divide by 10, then add that amount to savings each month. You should have more than enough to cover the expenses, once you've contributed 5-6 months worth of payments into the account. But you'll need to periodically refigure how much 1/10 of the actual expenditures is.

Posted: Tue Jun 01, 2010 08:30 am Post Subject:

It ONLY covers the LENDER for the amount owing on your loan. if you would be nice enough to TOTAL the car, the lender would be happy. Good Luck and BE SAFE


(link deleted by Moderator InsTeacher per Terms of Use)

Posted: Tue Jun 01, 2010 04:49 pm Post Subject:

Please explain how totaling a car has anything to do with protecting a mortgage-holder on a home loan.