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Complaint 0 of 0 in "Forced Insurance"

Insurance Carrier: Wncfirst Insurance Services
State: Hawaii

Consumer Complaint:

I refinanced in 05/07 from Security National who then gave to WellsFargo who then demanded hurricane ins. Which I never had in previous 22 yrs. My loan document requires "broad form" coverage & licensed to transact in HI. I have since retained windstorm coverage from my current insurance 'First Ins.' apparently a bit late. Wells Fargo is billing me for $977 for 2 months of their own coverage from WNC First Ins. Svs underwritten by Lloyds of London. Is this legal?


Insurance Expert Answer:

You have something known as "forced insurance." Under the terms of most mortgages, the homeowner/mortgagor is obliged to carry a certain level of homeowners (and possibly some other coverages) designed to protect the lender's interests in the event of catastrophe. If the homeowner fails to maintain insurance -- or provide evidence of insurance -- the loan documents typically permit the lender to take it out and add the premium to the balance of the loan. That's caused "forced insurance." When the lender takes out forced insurance it doesn't care how much the insurance costs -- as the customer pays for it. Further, the insurance companies know that there may be above average risks involved as folks who don't care enough to buy coverage on their own may not care about the house. And sometimes there are real reasons that the folks whose homes they are covering with forced insurance can't buy cheaper insurance -- some homeowners may be convicted arsonists, or guilty of insurance fraud, or running a meth lab. The force coverage also may have provisions protecting lenders if conventional coverage lapses, with the cost of THAT passed on to the forced coverage folks as part of their premium. Plus there is lots of piling on -- the price for the coverage is much higher, and so the commissions are much bigger, and the lender often has its own broker that gets a fee plus part of the commissions, etc. And no one is particularly sympathetic as you undoubtedly were told to buy insurance and didn't so they say you got what you deserved -- screwed. I think in some cases it is unconscionable and if so, it would not be enforceable or would be illegal. However, what I think is not important -- someone has to take them to court, and the cost of a lawsuit on an individual basis exceeds the amount they are charging you. Complain to the bank. Complain to the State Insurance Department. Consider small claims court.