Force-placed insurance

What it means

A mortgage requires the property to be insured. When the servicer sees that a policy has lapsed — which happens routinely after a death, when nobody is left paying the premium — it buys cover itself and adds the cost to the loan.

The cover is bad and the price is high. It protects the lender's interest in the building and generally nothing else: not the contents, not liability, not the family's ability to live in it. It typically costs several times an ordinary policy for a fraction of the protection.

Federal servicing rules constrain how it is done. A servicer has to send a written notice, wait a set period, send a reminder, and cancel the policy and refund the overlap once evidence of ordinary insurance arrives. Those letters go to the borrower's address, which after a death is often a house nobody is opening post at.

The related trap is vacancy. Many ordinary homeowner policies exclude or limit cover once a house has been empty for a period, so a policy that is still being paid may already have stopped covering the thing it is there for.

Why it matters

It is expensive, it accumulates silently on the loan balance, and it is entirely avoidable by telling the insurer and the servicer what has happened.

It is also a signal that nobody is reading the post at the property, which after a death is worth knowing on its own.

When you are likely to meet it

• When a mortgage statement after a death shows a charge nobody recognizes.
• When a home has been empty for weeks and the policy has not been reviewed.
• When the person who paid the premiums by direct debit is the person who died.

Related terms

• Due-on-sale clauseA mortgage term letting the lender demand the whole balance if the property changes hands — with exceptions that cover inheritance.
• LienA recorded claim against property, securing a debt, that has to be dealt with before the property can be transferred cleanly.
• Real propertyLand and what is permanently attached to it — a house, a barn, a fixed structure. Everything else a person owns is personal property.
• Successor in interestSomebody who receives an interest in a mortgaged home from a borrower who died, and gains the borrower's rights.
• Vacant and unoccupiedTwo words an insurer uses differently, and the difference can void the cover on an empty house after a death.

Official sources

The authority this page describes, at the agency that publishes it. Sahvelo does not restate a rule from a secondary source.

• CFPB — inheriting a house with a mortgage (opens in a new tab)

Sahvelo guidance that uses this

• The empty house