Your Policy Lapsed and the Lender Added Force-Placed Insurance. Should You Sell?

Your mortgage statement shows a much higher payment. Then you find a letter that says the lender bought insurance on your house. In Florida, a non-renewal or a canceled policy can leave a gap before a new policy starts, and a gap like that is one way this starts.

This guide explains what force-placed insurance is, the rules your servicer must follow, how to get it removed, and how each way of selling deals with it. It is general information, not legal or insurance advice.

What Force-Placed Insurance Is

Your mortgage requires you to keep the house insured. If you do not have a policy, do not have enough coverage, or your policy lapses, your servicer may buy one and charge you for it. The Consumer Financial Protection Bureau (CFPB) says this insurance often protects only the lender, not you, and is usually more expensive than finding a policy yourself (CFPB). You may also hear it called lender-placed insurance.

The National Consumer Law Center adds that force-placed insurance usually costs more and offers homeowners less protection than a standard policy (NCLC). Read your servicer’s notice to see what the policy does and does not cover. Many do not cover your belongings or your liability.

Florida also regulates this coverage. In 2023, the state created a part of its insurance code to regulate collateral protection insurance on real property (Florida Realtors, Fla. Stat. 627.9901).

Why It Happens

• A policy lapsed or was canceled. A non-renewal, a missed premium or a canceled policy can leave a gap. If your insurer sent a non-renewal, see our guide on Florida home insurance non-renewal options.
• Coverage is too low. The CFPB says a servicer may require force-placed insurance if your policy does not meet the requirements of your mortgage contract (CFPB).
• The servicer never got proof. Sometimes a new policy exists but the servicer does not have the declarations page.
• The escrow payment was not made. If you have an escrow account, NCLC explains that RESPA generally requires the servicer to pay your insurance from escrow even when the account is short, as long as you are not more than 30 days behind, with some exceptions (NCLC). The CFPB says that if your coverage was canceled because your servicer did not pay the premium on time from escrow, you may want to talk to an attorney (CFPB).

The Rules Your Servicer Must Follow

Federal rule 12 CFR 1024.37, part of Regulation X under RESPA, sets limits on most servicers (12 CFR 1024.37):

• Reasonable basis. The servicer must have a reasonable basis to believe you did not keep the insurance the mortgage requires before it charges you.
• First notice. It must send a written notice at least 45 days before it charges you.
• Reminder notice. It must send a reminder at least 15 days before it charges you, and not until at least 30 days after the first notice.
• Cancel and refund. Within 15 days of getting proof that you have the required coverage, it must cancel the force-placed policy and refund the force-placed premiums and related fees you paid for any period when both policies overlapped.
• Fair charges. All charges must be bona fide and reasonable.

The rule does not cover flood insurance required under the Flood Disaster Protection Act. That has its own rules. If you think your servicer made a mistake, the CFPB says you can send a notice of error, a letter that disputes the action (CFPB). The CFPB says the servicer generally has five business days to acknowledge your letter (CFPB servicer rights handout).

Two Florida rules worth knowing

Under Florida Statute 627.9905, the coverage amount on force-placed property coverage is based first on the last known coverage amount, then on replacement cost, and then on the unpaid loan balance if replacement cost is not available. The same section says that after a covered loss, any replacement cost coverage above the unpaid principal balance of the mortgage must be paid to the homeowner.

How It Changes Your Payment

With an escrow account, the servicer pays the force-placed premium out of escrow. That can leave the account short. The OCC says a bank may let you repay an escrow shortage in one lump sum or spread it over 12 months (HelpWithMyBank.gov).

Here is how the math works, as an example only. If a yearly charge of $6,000 is spread over 12 months, the monthly payment goes up by $500. If the servicer also raises the monthly escrow amount for next year’s premium, the jump can be bigger. Your escrow statement shows the real numbers.

Step One Is the Same Whether You Keep or Sell

The CFPB lays out the path (CFPB):

1. Contact an insurance carrier or agent as soon as possible. Get a new policy or ask to reinstate the old one.
2. Send proof of the policy, and anything else the servicer asked for, to your servicer. Ask it to cancel the force-placed policy.
3. If you disagree with what the servicer did, send a notice of error in writing.

Keep your own policy in place until closing even if you plan to sell. The house is still yours, and a gap can bring the force-placed charges back.

Keep or Sell: Questions to Ask Yourself

If payments are already behind, read our guide on selling a house when behind on the mortgage in Florida.

How the Payoff Works When You Sell

In a sale that pays off the loan, the title company asks your servicer for a payoff statement. The CFPB says that if you write to ask for your payoff amount, the servicer generally has seven business days to answer (CFPB). Ask for an itemized payoff. Check for force-placed charges, escrow advances, late fees and any period when your own policy was already in place. If you sent proof of coverage, the overlapping charges should have been refunded.

After the loan is paid in full, the same CFPB handout says the servicer should refund money left in your escrow account within 20 days. You can also ask the servicer in writing whether any unused force-placed premium will be returned after payoff. For the other costs at closing, see our guide to Florida home seller closing costs.

Three Ways to Sell, and How Each One Handles Force-Placed Insurance

For a side by side view, see cash offer vs listing vs selling on terms, or use our compare selling options page.

1. Cash, as is

We may buy the property as is with our own funds, or our contract may be assigned to another buyer; your written offer will say which. The title company pays off your loan at closing from the sale, so the force-placed policy ends with the loan. We do not need a lender to approve a buyer’s insurance policy before closing, so an older roof that makes insurance hard to get is less likely to hold up the sale. We insure the house ourselves after we own it.

Subject to qualification, property inspection, and transaction terms.

2. Creative terms: subject-to or seller financing

In a subject-to sale, the buyer takes the deed and makes the payments on your existing mortgage. The loan stays in your name. The lender can call the loan due under the due-on-sale clause. Both sides should use a real estate attorney. Because the loan stays open, the force-placed policy does not end on its own. The paperwork should require a proper policy that meets the mortgage terms, with proof sent to the servicer so it can cancel the force-placed coverage. With seller financing, your attorney should require the buyer to insure the house and list you on the policy.

Subject to qualification, property inspection, and transaction terms.

3. A 1% full-service listing

If the house is in good shape, a listing on the MLS through our licensed brokerage partner may bring the highest price. Our partner is a separate licensed Florida brokerage. The listing fee is 1%. Buyer agent compensation is separate and negotiable. Your loan is paid off at closing. A buyer with a mortgage will need their own policy, so roof age, a four-point report and a wind mitigation report can help them get a quote.

Subject to qualification, property inspection, and transaction terms.

How HOMKEYS Can Help

HOMKEYS LLC buys homes across Florida from our office in Brickell, Miami. We show you cash, terms and a 1% listing side by side, in writing, and every closing goes through a licensed Florida title company. We cannot quote a price before we see the house. Subject to qualification, property inspection, and transaction terms.

Frequently Asked Questions

Not legal or insurance advice. This guide is general information about Florida home sales and mortgage insurance rules. Rules change and every loan and policy is different. Talk with a licensed Florida insurance agent, a Florida real estate attorney, or a HUD-approved housing counselor about your own case before you sign anything.

⌂ Equal Housing Opportunity. HOMKEYS LLC does not give legal, tax or insurance advice. Talk with a Florida real estate attorney or licensed insurance agent about your situation.