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What if your lender doesn’t pay the home insurance?

On Behalf of | Jan 5, 2022 | Residential Homeowner's Insurance Litigation

You decide to file a home insurance claim, and you’re shocked to find out that the insurance company says you no longer have a policy. It was canceled when you didn’t pay. 

Your shock isn’t just that you’re not covered, but that your lender didn’t pay. Since you have a mortgage, you generally escrow that money and then it is the bank’s responsibility to pay for the insurance policy on your behalf. You just assumed that they did, but it looks like they missed a payment, and your policy got canceled. 

What does the bank need to do? 

As long as you have made your proper payments and deposits, the bank is legally required to pay for your home insurance on time under the Real Estate Settlement Procedures Act

If the bank did not do so, they have to get in touch with your insurance company, explain what happened, and see if they can renew the policy. If this is impossible, they need to find another insurance company and buy a different policy for you. Either way, they need to rectify this mistake, since you sent them the money that they needed on time and they were the ones who failed to pay. 

But what if your claim gets denied? 

As you can imagine, your claim could certainly be denied because your policy was dropped due to the bank’s error. You may also face a denied claim if certain paperwork errors make it look like you haven’t paid it on time when you have or when the bank has. No matter why it is denied, make sure you know what legal options you have.


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