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Insurance - General Property Insurance


I let my home insurance lapse. The bank went out and secured a new policy, and then notified me that I'm responsible for paying the premium. The new insurance is a lot more expensive. Can the bank do this?

Yes. Loan contracts usually contain a provision requiring insurance on the loan collateral. National banks can "force place" insurance on your behalf at any time during the term of the loan. The bank can do this if it determines that the property securing the loan is not covered by insurance—or is underinsured.

However, the bank must first advise you to purchase the insurance. If you do not do so within 45 days after receiving notice from the bank, it can purchase the insurance on your behalf. The premium on this insurance will always be much more expensive than a policy you purchase.

The bank can charge you for the cost of the insurance premiums and any fees incurred in purchasing the insurance. It can do this in one of three ways:

My mortgage company did not pay my home insurance last month. My policy was cancelled. Is the bank now responsible for insuring me?

If you maintained an escrow account with the bank and made regular deposits for the payment of taxes and insurance, the bank must make timely payments of these items from the account.

Let’s say the bank does not pay the insurance premium when it is due and the policy is cancelled. In this case, the bank must either contact the insurance company and have the policy reinstated, or purchase a policy with another insurer.

However, during this time you remain responsible for continuing to pay the insurance through your escrow account.

My home was damaged in a hurricane. I received an insurance check and sent it to the bank for its endorsement, but the bank won't remit the funds to me so that I can repair my home.

The loan documents that you signed at your mortgage closing generally give the bank the authority to monitor the work and verify that repairs have been completed.

As national banks have different policies and procedures for releasing insurance claim proceeds, you should review your mortgage loan documents for more information.

My home was damaged by an event—such as fire, wind, or storm—covered by my homeowner’s policy. The bank will not send me the entire amount of the insurance check so that I can repair my home.

The loan documents that you signed at your mortgage closing generally give the bank the authority to monitor the work and verify that repairs have been completed.

As national banks have different policies and procedures in releasing insurance claim proceeds, you should review your mortgage loan documents for more information.

When I receive an insurance check made payable both to me and to the bank, do I have to send it to the bank?

Yes. Generally, the bank is the lien holder on the collateral for the loan. Therefore, the check is made payable to both the policy holder (the consumer) and the lien holder (the bank). It must be endorsed by both parties.







Copyright 2007 by Mark McCracken , All Rights Reserved