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I have looked in the past at situations where car owners with loans have been forced to buy insurance:

Does Your Financed Car Have Real Car Insurance?, Mike Bryant | February 08, 2012 9:52 AM

These situations cost a lot more money and don't provide the coverage that ordinary insurance provides. Usually, they hit those who have the least money the hardest. It is situations where people fall behind and the financing companies provide coverage. I have always wondered how the coverage is even legal, considering how little protection it provided beyond the financier's money.

The Minneapolis Tribune looked at the situation concerning homeowners:

Billed as a policy of last resort, force-placed insurance is routinely imposed on homeowners by lenders when property is not covered against tornados, floods, and other hazards. The coverage can cost 10 times as much as typical homeowners insurance despite offering less protection.

Across the country, the high premiums are pushing hundreds of thousands of vulnerable homeowners closer to default as the costs are added to their monthly mortgage.

When Keeney's homeowners policy lapsed, she was pushed into a forced-placed policy at an annual cost of $4,185, well above the $1,655 she used to pay State Farm. "It's ridiculous," she said.

The cost is part of the loan and looks like real insurance. When you look at how expensive the fake coverage is, the person could have bought solid protection and often for less. I hope the legislature will look at these policies and stop this gouging of the consumer.

These policies are bad . Make sure you don't have one.



  1. Gravatar for Debbiee

    If banks want to prevent a laps in coverage then the banks need to be required to offer a back up auto pay on property insurance. When a home owner does not send the insurance payment by the end of a 5 day grace period bank auto pay kicks in. You know like over draft protection on checking accounts. The banks can charge the same interest on this money as the loan. THIS SOLVES EVERYTHING! No lapes in coverage, no back dated insurance policies, no moving servicing rights around every few months to generate prorated refunds on prepaid policies, no pay to play, no reinsurance to prevent claims o the policy and to recieve up to a 75% commission paid to the bank for the money billed according to a recent insurance hearing, no reduced coverage at a higher price, no puting children in the street with greed unnessarily, return banks to lending money to make a profit, no making recovery impossible by making the problem worse. The CFPB solution is for the bank to tell the homeowner in writing that they are going to place an over priced policy on them with less overage and then they can push them off the cliff. This does not address any of the problems listed above or any of the symptoms even. This solution actually lagetimizes the problem instead of fixing it. Love the CFPB but they have this one wrong and I ask that everybody email them. Please help!

    Thank you Mike for the information. :-)

  2. Joe Saunders

    Great advice Mike. Force placed insurance can be a real rip off and some people have lost their homes due to the very high costs of these policies that only protect the mortgage lender and not the home owner.

  3. Mike Bryant

    Your are welcome Debbiee , Thank You for reading and the insight.

  4. Mike Bryant

    So True Joe it is criminal that they tack on coverage that just protects them.

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