Forced to Pay for Excessive Wind Insurance?
Last Updated on June 26, 2017
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At A Glance
- This Alert Affects
- Property owners who were forced by their mortgage lenders to carry excessive, backdated or unnecessary wind insurance.
- Company(ies)
- M&T Bank, Fifth Third, Dovenmuhle, Provident Funding, Flagstar and Capital One
- Additional Details
- While lenders have the right to ensure that their borrowers' property is adequately insured, complaints are growing that homeowners are being charged excessively high rates and are struggling to get these charges removed.
Allegations have surfaced that banks across the country have been force-placing excessive, costly and unnecessary insurance, including windstorm coverage, on unsuspecting borrowers. While mortgage lenders are permitted to impose coverage if the homeowner’s insurance policy lapses, this coverage is typically priced well above the fair market price, and is allegedly being imposed on borrowers in excessive amounts, or in some cases, when such coverage is not necessary. It has been further alleged that banks are receiving kickbacks for these purchases, while some homeowners are left to face default or foreclosure as a result of these excessive policies.
Unnecessary, Retroactive Wind Coverage: What Other Consumers Are Saying
One Florida resident let his windstorm insurance policy lapse in 2010 when he heard that Wells Fargo would no longer be requiring such coverage. He figured that the bank would send him a letter if he failed to carry adequate coverage and, when such notice did not arrive, he thought he saved more than $2000 for that year. Then, in the summer of the following year, he received notice from the bank telling him to buy windstorm coverage for that year, which he proceeded to purchase. He also received another letter saying that because the coverage lapsed for the previous year, he would be charged retroactively for a forced-placed windstorm policy which the bank purchased on his behalf for nearly $12,000.
Bank of America has faced similar allegations, with one customer claiming that he was charged nearly $4500 annually for a force placed policy, even though he already had adequate coverage. He claims that he was forced by his lender to pay for a policy which covered only wind and hail damage and cost twice as much as his regular, comprehensive insurance policy. One Zions Bancorp customer also claimed that after her hurricane insurance lapsed because of an error on part of her insurer, her bank force placed coverage and backdated it a year. Not only did the force-placed policy provide retroactive hurricane insurance for a year in which no hurricanes were seen, it also covered flood and wind damage even though she never allowed policies for these hazards to lapse.
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