Force-Placed Insurance Puts Squeeze on Struggling Homeowners

For many people caught in the downed economy, saving their home is a top priority. This often means looking for ways to trim the budget in order to make the monthly mortgage payment.

Some homeowners make the difficult decision to let their homeowner's insurance lapse in order to make ends meet. What many may not realize is that they may be setting themselves up for an even larger expense with force-placed insurance.

As the name implies, force-placed insurance is a form of insurance that can be forced onto homeowners by their mortgage lenders. The idea behind force-placed insurance is to help mortgage lenders protect their investments from ruin in storm, fire, or the like. The problem, as many homeowners discover, is that it is extremely expensive.

Force-placed insurance is a lone wolf in the Minnesota insurance world. It is unregulated, meaning there are no limits on how much it can cost. As such, this form of coverage frequently costs four times what regular homeowners coverage would cost. To make matters worse, mortgage lenders are able to earn a commission for thrusting it upon homeowners. According to the Star Tribune, JP Morgan Chase earned over $663 million in the past five years in force-placed insurance commissions.

Homeowners are the ones who really suffer. Force-placed insurance can push them into a pit they cannot hope to climb out of. Force-place insurance ultimately can push many into foreclosure.

Instead of letting their coverage lapse, homeowners who are searching for ways to make ends meet may want to consider bankruptcy. Chapter 7 bankruptcy can help homeowners to get rid of unsecured debt, freeing up their pocketbook to keep their house running. Similarly, Chapter 13 bankruptcy can help individuals get remove unwanted debt while reorganizing the good debts, such as home and car that they want to keep.

Our bankruptcy firm regularly deals with complicated financial pictures. For more information about our Minneapolis Chapter 7 and 13 bankruptcy practice, please visit our website.

Source:, "Forced insurance policies cripple Minnesota homeowners," Jeffrey Meitrodt, 8 October 2012

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