Why is LPI (aka Force-Placed Insurance or Creditor-Placed Insurance) Necessary?
Almost all mortgage agreements require that homeowners maintain continuous insurance coverage on their property. Homeowners always have a choice to select their own coverage, but if a homeowner does not maintain the required insurance policy, the lender will obtain the necessary insurance to ensure the property (which serves as collateral for the loan) remains protected from damage or destruction. Insurance obtained by the lender is known as lender-placed insurance (LPI), also known as force-placed insurance or creditor-placed insurance.
How to Avoid a Lender-Placed Policy
Did you receive a letter from your lender that they are unable to confirm insurance on your home? If so, you should take the following steps immediately to avoid the lender purchasing a policy for the property.
Call your homeowners insurance company or agent to confirm there is coverage on your home and, as instructed by your lender, provide evidence of that coverage.
Lender-Placed Insurance Process
To secure a mortgage, borrowers must obtain homeowners insurance. When insurance is not maintained, Assurant will provide notifications reminding homeowners to provide proof of insurance. They do this on behalf of their mortgage servicing clients.
To learn more about how the lender-placed insurance process works watch this video.
Assurant’s Role in the Lender-Placed Insurance Market
Assurant is the leading provider of LPI in the U.S., protecting hundreds of thousands of single family homes, condominiums and other residential property types. A study by Oxford Economics found that LPI is a critical safety net for homeowners, lenders, and investors, and can have a positive impact on mortgage approvals and that following disasters, the presence of LPI was associated with lower debt-to-income ratios, fewer mortgage delinquencies, and lower federal disaster recovery spending.
LPI (Force Placed Insurance) Education
When a buyer purchases a home, the mortgage contract includes a requirement to maintain continuous insurance coverage on the property. For lenders and mortgage servicers, this helps protects the value of the financial asset the property represents and supports stability across the loan portfolio or business. This requirement also protects the home and provides peace-of-mind for the homeowner should the home ever be damaged or destroyed.
For more information, click to view the definition from the National Association of Insurance Commissioners and additional information from the Florida Office of Insurance Information.
Need more information?
Lender-placed insurance, force-placed insurance and creditor-placed insurance are essentially the same. Here's a glossary of key terms associated with this coverage.