Forced Place Insurance

AAA

DEFINITION of 'Forced Place Insurance'

The insurance that a lien holder places on a property, to provide coverage in the event the borrower allows coverage to lapse. Forced place insurance is intended to ensure that the property remains insured, protecting both the homeowner and the lien holder. The costs associated with forced place insurance are paid upfront by the lien holder, but added to the balance of the lien. Due to the relative ease of abuse resulting from forced place insurance, there are specific provisions in the Dodd-Frank Act that require forced place insurance to be "bona fide and reasonable."

INVESTOPEDIA EXPLAINS 'Forced Place Insurance'

Forced place insurance has drawn insurance, because it is easy to abuse, particularly when the loan servicer owns the insurer. Loan servicers, for example, have been found to allow one policy to lapse only to replace it with another, more expensive policy. In these cases, the loan servicer could receive large cash incentives or kickbacks from the insurer, as compensation for giving it the policy. In addition, forced place insurance policies have been known to be back-dated, to collect for premiums for periods of time that have already passed.

RELATED TERMS
  1. Private Mortgage Insurance - PMI

    A policy provided by private mortgage insurers to protect lenders ...
  2. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  3. Property Insurance

    A policy that provides financial reimbursement to the owner or ...
  4. Mortgage Insurance

    An insurance policy that protects a mortgage lender or title ...
  5. Lender-Paid Private Mortgage Insurance

    Private mortgage insurance that a mortgage lender pays on behalf ...
  6. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty ...
Related Articles
  1. Personal Finance

    Understanding Your Mortgage

    We walk through the steps needed to secure the best loan to finance the purchase of your home.
  2. Home & Auto

    6 Reasons To Avoid Private Mortgage Insurance

    This costly coverage protects your mortgage lender - not you.
  3. Home & Auto

    How To Outsmart Private Mortgage Insurance

    It's possible to use a second mortgage to avoid this fee, but is it in your best interest?
  4. Credit & Loans

    Understanding The Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  5. Insurance

    Top 5 Car Insurance Companies in Florida

    Learn which car insurance companies lead the Florida market in terms of market share and new premium dollars, and discover which companies are growing fastest.
  6. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
  7. Professionals

    What Kind of Insurance Do RIAs Need?

    Advisors spend a lot of time discussing insurance with clients but they also need to consider their own coverage needs as small-business owners
  8. Insurance

    How to Shop for Home Insurance

    Tips for getting the best protection for your place and possessions.
  9. Stock Analysis

    How MetLife Became a Global Insurance Giant

    MetLife is the largest life insurer in the United States. Here's how it has managed to stay on top.
  10. Insurance

    Understanding Co-Insurance

    Co-insurance is a cost-sharing agreement between an insurer and an insured party.
RELATED FAQS
  1. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Full Answer >>
  2. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>
  3. What risks do I face when investing in the insurance sector?

    Like all equity investments, insurance companies present investors with market risk. Insurance companies, like banks, also ... Read Full Answer >>
  4. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  5. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  6. Can I buy insurance to reduce unlimited liability in a partnership?

    Partnership insurance is actually quite common. Most of the time, partners buy insurance to safeguard against the possibility ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  2. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  3. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  4. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
  5. Wedding Warrant

    A warrant that can only be exercised if the host asset, typically a bond or preferred stock, is surrendered. Until the call ...
  6. Marlboro Friday

    A reference to Friday, April 2, 1993, when Philip Morris, the maker of Marlboro cigarettes, announced that it would be cutting ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!