Originally published by Jason Cieri.
In certain situations, insurance companies may hedge their risk against any loss in an insurance contract. This is called re-insurance. Typically, no one would have an issue with this as it is smart to minimize your risk in certain situations.
How would you feel if I told you that your mortgage company can hedge its risk against you, not by re-insurance, but by forcing you to own flood insurance at a high premium rate without giving you an opportunity to shop for the cheapest option. Not only are you paying higher premiums, but you typically pay service or administrative fees to the mortgage company for acquiring the insurance for your property. This is called “forced-placed” or the more friendly term “lender-placed” insurance. Force-placed policies are typically taken out by banks or other lenders on homes where the owner does not have sufficient or any coverage. Regulators in the past have accused insurers of dramatically overcharging for such policies. You…
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Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.
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