A lapsed policy costs more than you think

A south Florida woman who once held an insurance producer license was sentenced to more than three years in prison and ordered to forfeit assets after pleading guilty to a leading role in what Insurance Journal describes as a $6 million force-placed insurance scheme. Force-placed coverage, also called lender-placed insurance, is what your mortgage company buys on your behalf when it sees that your policy has lapsed.

That product is worth understanding even if nobody ever defrauds you with it. Force-placed coverage protects the lender's interest in the building. It does not cover your personal belongings, it does not include liability protection if someone gets hurt at your house, and it generally costs more than a policy you shop yourself. The charge lands in your escrow, so the first sign is often a mortgage payment that jumped for no obvious reason. Two habits prevent the whole situation: pay the premium on time, and make sure your mortgage servicer has your current declarations page after every renewal or carrier change.

An independent agent can confirm your servicer has proof of coverage on file and re-shop the policy so a lapse never turns into the lender's decision.