Lender-placed insurance costs 5-10x more than normal coverage and protects only the lender, not you. Servicers get kickbacks for placing it. When they add $10,000+ to your escrow for insurance you didn't request, you have the right to fight back.
Force-placed insurance (also called lender-placed or creditor-placed insurance) is coverage the servicer buys on your behalf when they believe your property lacks adequate insurance. It's charged to your escrow account—often without your knowledge—and creates massive payment increases.
| Coverage Type | Annual Premium | Coverage |
|---|---|---|
| Regular Homeowner's Policy | $1,500 - $3,000 | Full coverage (structure, contents, liability) |
| Force-Placed Insurance | $8,000 - $15,000+ | Lender interest only (no contents, no liability) |
Servicers often have financial relationships with force-placed insurers—commissions, reinsurance arrangements, or affiliate ownership. They profit when they place this insurance on you, creating a conflict of interest.
Under 12 CFR 1024.37, servicers must follow strict procedures before force-placing insurance:
Each notice must:
If you provide evidence of coverage within 15 days of force-placed insurance purchase, the servicer must cancel the policy and refund ALL premiums charged. This is mandatory under RESPA.
Common scenarios where force-placed insurance violates RESPA:
Servicer placed insurance without sending required 45-day and reminder notices
You maintained continuous coverage but servicer claims a "gap" or didn't receive proof
You provided coverage proof but servicer refused to cancel and refund within 15 days
Servicer placed coverage exceeding loan balance or property value—more than necessary
Common reasons servicers claim lack of coverage:
Get a letter from your insurance company confirming continuous coverage and the exact dates, then dispute the force-placement in writing.
Maybe not entirely. Under RESPA:
If your policy lapsed from March 1-15 but they're charging for three months of force-placed insurance, dispute the excess charges. They're only entitled to charge for the 15-day gap.
This is the crisis that force-placed insurance creates. Steps to take:
The servicer's improper force-placement cannot be the basis for foreclosure if it was wrongfully charged. This is a defense.
If the only reason you're "behind" is wrongful force-placed insurance charges, you have strong defenses:
Document everything and fight the charges. If foreclosure is imminent, see my TRO Guide for emergency relief.
I help California homeowners challenge wrongful force-placed insurance, demand refunds, and defend against foreclosure based on inflated escrow charges. If your servicer is gouging you on insurance, I can help.