Understanding Lender-Placed Insurance

Today’s lender-placed insurance is a critical part of the U.S. mortgage finance system

Almost all mortgage agreements require that homeowners maintain sufficient insurance on their property. Homeowners always have a choice to select their own coverage, but if a homeowner does not keep the required insurance, 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.

Lender-Placed Insurance (LPI): Know the Facts

LPI protects homeowners and supports homeownership.

LPI protects homeowners' most important asset, their home. LPI supports homeownership by ensuring a home will always be protected and facilitating the mortgage process by removing the risk of uninsured loss for lenders, investors, and homeowners.

Mortgages require insurance and LPI provides coverage regardless of the home’s geography or condition.

Lenders obtain LPI only when it is necessary. LPI covers any home that needs insurance, even those in high-risk flood or fire-prone areas, that other insurers may not be willing to cover.

Homeowners always have the choice to obtain their own insurance.

The LPI process ensures clear and simple communication with the homeowner stressing that they can and should obtain their own insurance. When a homeowner does not maintain the required insurance, lenders provide reminder notices that the homeowner must secure insurance on the property.

Lender-Placed Insurance Process

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 insurance company or agent to confirm there is coverage on your home and provide evidence of that coverage to your lender
  • If you no longer have insurance coverage, take action immediately to obtain insurance on your home and provide evidence of that coverage to your lender.

Assurant’s Role in the Lender-Placed Insurance Market

Assurant is the leading provider of LPI. We’re proud of the important risk management role we provide to support U.S. homeownership. To further understand this relationship, we asked Oxford Economics to analyze our product and provide more information about its role in the mortgage financing system. Oxford also studied the relationship between LPI and the socioeconomic consequences of a natural disaster. 

Oxford’s findings show that following a natural disaster, the presence of LPI is associated with lower debt-to-income ratios, fewer mortgage delinquencies and lower federal disaster recovery spending. 

Oxford also determined that although the cost of LPI may be higher than standard coverage, it is not significant enough to cause mortgage delinquency. Instead, because LPI is a risk management safety net for homeowners, lenders and investors, Oxford found that LPI’s role has a positive impact on mortgage approvals. 

Click here to download the Oxford Economics analysis report on Lender-Placed Insurance.

Frequently Asked Questions