I often find that when asked about their insurance, my bankruptcy clients tell me that they are “covered by insurance from the mortgage company.”
Bankruptcy or not, be very clear about this:
- If your insurance lapsed and you were notified by your mortgage company that they have obtained insurance for you, this insurance covers their loan in case of fire/theft/damage but it does not cover the homeowner‘s property or interest.
In other words, in case of damage, you will pay a lot more for this ‘special’ insurance that will pay the lender the loan amount, but will not cover your own property or loss that would be covered by a less expensive, regular policy.
Forced place insurance is usually more expensive than regular insurance, and much more limited in scope of coverage. It is very important if you find that your insurance has lapsed that you get a policy to cover the house and also you.
Do not rely on your mortgage company to protect you.