I recently received a referral from a banker who called me with a client sitting at her desk. The client was paying a ridicoulous amount of money for her homeowners insurance because the banks mortgage department added their own version of insurance to her mortgage (escrow) account. In about 30 minutes I reduced her insurance over 50% and saved her over $2,000 a year. All while providing her with better coverage.
If you do not provide evidence of proper homeowners insurance coverage, most mortgage companies place ("force") insurance coverage and pass the cost along to you. This is typically VERY expensive compared to you getting coverage on your own. Generally 2-3 times the rate of a normal homeowners insurance.
Forced placed insurance only protects the lender's interest in the property. It does not provide protection for your personal property inside your home against damage, catastrophe, robbery, etc.
Furthermore, if you allow your homeowner's insurance to lapse over 30 days it may become more difficult to obtain a new policy. Some insurers will look at you like a high risk since you let the other policy go.
Never allow yourself to be in the position where a forced-placed insurance policy is added to your mortgage and drains your pocket book.
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