Most lenders require that you have property insurance on your property. Since the loan they made is secured or collateralized by a property with structures on it, they want to make sure that if the structures burn down (and the value of the property decreases), they can still collect their money.
Consequently, most lenders notify your insurance carrier that they want to be notified when policies are up for renewal. They also want to be notified when property insurance is not renewed by the borrower.
If a borrower does not have their insurance in place, a lender will place what is called force-placed or lender-placed insurance. Most of their loan documents require that you reimburse the lender for the cost of this policy.
As this NYTimes article lays out, forced insurance comes at a much higher cost from insurance companies. For homeowners these policies can be 2 to 10 times more expensive than standard policies, according to the article. It can be a crippling experience to a property owner that is trying to get back on their feet.
What’s the moral of the story: Keep you property insurance paid. If you pay it, your lender won’t have to.
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