The Consumer Financial Protection Bureau (CFPB) this week released a new consumer guide intended to offer guidance for people when their property insurance costs surge, or when their coverage is canceled by their carrier.
The move comes as more property insurance providers are either limiting or pulling their coverage in certain parts of the country that may be more prone to natural disasters, as increasingly severe climate and extreme heat events have racked the nation over the past couple of years.
“In response to extreme weather events and natural disasters, some home insurance companies are going out of business, the CFPB guide said. “In states like Florida and California, several insurers have stopped selling policies. Other companies have increased the price of insurance to the point where homeowners can’t afford it. Homeowners are facing new decisions about insurance, often with limited time to consider their options.”
The CFPB guide cautions homeowners that if a policy is canceled for whatever reason, their lender is allowed to buy insurance and charge the borrower for it. That insurance typically only insures the lender and not the borrower, but can come with higher costs for the consumer.
Avoiding this so-called “force-placed insurance” by actively shopping around and taking advantage of state-based Fair Access to Insurance Requirements (FAIR) plans, or local equivalents, can be a big difference-maker for a borrower facing issues with their existing coverage.
Borrowers should immediately notify their servicer of any coverage change in order to avoid force-placed insurance, and the CFPB also published a guide specifically about removing force-placed insurance.
The issues related to insurance carriers and climate events are not likely to dissipate anytime soon, the Bureau said.
“According to most predictions, extreme weather events and the natural disasters they trigger are expected to intensify and spread to more areas of the country,” the CFPB said. “Check our tips for assessing your climate risk, and you can fill out Your Disaster Checklist to keep track of your important financial information. The CFPB continues to work with policymakers, keeping an eye on the financial system and mortgage markets for stability.”
Due to increased costs and less accessibility in highly impacted areas, recent data indicates that more homeowners are choosing to forgo property insurance altogether. Such a choice is more readily available for those who own their homes outright, which seniors are more likely to do.
Reverse mortgage requirements to keep a loan in good standing include staying current on property taxes and homeowner’s insurance.
