RICHMOND – When you take out a loan to buy a vehicle, house, or commercial property,
your lender will require that you buy and keep insurance on the property for the
term of the loan. If you fail to maintain adequate insurance coverage on the property
or vehicle you are purchasing, the lender will buy an insurance policy – often called
force or lender placed coverage – and add it to the cost of your loan payment.
Lenders take out force placed policies to protect their investments in the event
the collateral is damaged or destroyed. The State Corporation Commission’s (SCC’s)
Bureau of Insurance warns that premiums for force placed insurance coverage are
typically much higher than standard insurance premiums.
Lenders may force place coverage in the following instances:
- You have insurance, but you have not shown your lender written proof of coverage.
- You do not have insurance because you canceled the policy or the insurance company
canceled or non-renewed your policy.
- You have insurance, but the amount or type of coverage is not what you and the lender
agreed you would buy.
The Bureau of Insurance cautions that if your lender force places insurance on your
property, your interest in that property may not be fully covered. In addition,
if your home is damaged by fire or another insured peril, the lender’s force placed
coverage may only pay to repair the structure and will not pay for loss to your
The Bureau offers the following suggestions to avoid force placed coverage:
- Maintain adequate coverage on your property as required by your lender.
- Send written proof of insurance to your lender when you purchase insurance or any
time the lender asks for proof of coverage.
- Review your bank statements regularly for possible duplicate insurance payments
to ensure the lender did not force place insurance without your knowledge. (Lenders
should notify you within 30 days of force placing coverage.)
- Make sure you understand your responsibilities under the loan agreement, including
the deadline to buy insurance.
- Contact your lender as soon as possible if your insurance policy lapses or is canceled
- If a lender force places coverage on your property, shop around for and secure your
own insurance coverage as soon as possible. This will save you money and better
protect your interests.
The SCC’s Bureau of Insurance may be able to secure a refund if your lender force
placed a policy while your own insurance coverage was in force.
To learn more about force placed coverage and many other insurance-related topics
or to file a complaint, contact the Bureau of Insurance Property and Casualty Division
in Richmond at (804) 371-9185 or toll-free at 1-877-310-6560 or visit the Bureau’s
website at www.scc.virginia.gov/boi. Consumers who are deaf or who are hearing or
speech impaired may call through the SCC’s Telecommunications Device for the Deaf
and Hard of Hearing (TDD) at (804) 371-9206.
The SCC is located in the Tyler Building at 1300 East Main Street in downtown Richmond.
Normal business hours are from 8:15 a.m. to 5 p.m. Correspondence may be mailed
to the Bureau of Insurance at P.O. Box 1157, Richmond, VA 23218.