Forced Place Insurance
When a person buys a house or a car, part of the contact they sign requires them to have insurance on the property until the loan is paid in full. If it is a car, you are required to have full coverage and not just liability insurance. Depending on where the house is located depends on what extend of insurance is requires. Most houses only require hazard insurance, but if it is located in an area prone to flooding, flood insurance is usually required as well.
It is important to notify your insurance company who is the lien hold on the insured property so they can be properly notified. If you do not have insurance or the lien holder is not aware of you having insurance, they will have forced place insurance. This will cause your payments to go up, and forced place insurance is usually much more expensive than if you were to purchase it on your own.
If you file a bankruptcy, it is required you have full coverage insurance on any cars you still owe money to a creditor. It is important to have full coverage insurance on your car, or the car creditor will file a motion to lift the stay and it will be granted or you will be given a couple of days to get insurance, provide proof to the car creditor, and will have to pay their attorney’s fees for them filing the motion with the court.
Homeowners insurance is a little different. Mortgage companies will generally just get the house insured and increase your payments by a few hundred dollars a month. Mortgage Company will also include the cost of the forced place insurance in their proof of claim if they have already purchased it. This can cause a huge discrepancy in what the Debtor lists in the plan and what the Creditor is requiring be paid. In the long run, it is always cheaper and in the best interest of the Debtor to always have his property fully insured as required by the contract they signed when the purchased the property.
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