Every mortgage lender requires the home buyer to purchase homeowners' insurance. This coverage not only protects you but it also minimizes the lender's losses should the house be damaged by fire, natural disasters or other events. In addition, this insurance coverage must be in effect for the life of your mortgage.
At your closing, your lender required a specific level of home hazard insurance on the property before signing off on the mortgage. You or your insurance agent need to be aware of specific coverage requirements outlined in your mortgage agreement. Then you must maintain that level of coverage to protect the lender's interest or you risk defaulting on your loan.
If you fail to pay or maintain your homeowners coverage, you could lose your mortgage. And this includes the event of your homeowners' being cancelled for some reason by your current insurance company.
Your homeowners' insurance is in your name and you have the right to change companies. However, both you and your lender will receive a notice 30 days before expiration that it won't be renewed. At this point, you need to purchase new insurance from another company immediately so that it goes into effect on the cancelation date. Once you have the new policy, you need to provide a copy of your declarations page to your mortgage lender.
It is very important that you stay in contact with your mortgage lender as you get new insurance. Because if your lender decides you are not acting fast enough, it may purchase homeowners' insurance on your behalf. And that is NOT necessarily in your favor. Lender-placed or force-placed insurance often costs five times as much as traditional homeowners' insurance. It offers less favorable terms and increases your monthly mortgage payment.
The lender usually enacts this insurance as soon as they receive a cancellation notice unless you contact them immediately with replacement policy information. Each mortgage has wording to the effect that if you fail to maintain insurance, you are in default and your lender could foreclose on your home. But mostly likely the lender will opt to replace your homeowners' themselves, but it will still increase your financial burden.
For the protection of your home, always pay attention to the annual notices sent to you by your homeowners' insurance company to monitor any potential problems or cancellation of your insurance.
If you see any issues or if you have any questions on your renewal, contact your J.P. Perry insurance agent immediately.