How to Maintain Homeowner's Insurance During Foreclosure
Homeowners who are in the process of losing their homes to foreclosure have a lot on their minds. Finding a buyer in order to complete a short sale, working with an attorney to slow down the foreclosure process, or seeking alternative housing can occupy most of the homeowner's thoughts.
However, there is one thing the homeowner must keep active at all times, and that is their homeowner's insurance. This is essential because the insurance policy can protect their home in the event of damage, or can protect the homeowner, personally, should someone become injured on the property. Let's explore how to keep a homeowner's policy active while working through foreclosure.
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Instructions
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Determine how your homeowner's insurance is paid. If you are making mortgage payments, then your insurance costs are likely being held in escrow. These funds are set aside to pay property taxes and homeowner's insurance, monies regularly distributed by your mortgage company to your local government and insurer, respectively. If you fall behind on mortgage payments, you may also be behind on your taxes and insurance. Confirm how your insurer is paid by reviewing your home purchase agreement.
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Contact your insurance company. Find out from your insurer whether payments are current. If not, ask how you can make a payment immediately. If you are current, inquire about making future payments directly to your insurer. Explain your financial situation and the steps you are taking to resolve the problem, sharing your desire to have your home adequately insured until the home has been foreclosed or your problem resolved.
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Seek legal guidance. If your lender is not making escrow payments to your insurer and you have no means to pay for homeowner's insurance, then seek legal assistance on what to do next. To protect their interests, your insurance company may provide what is known as "forced insurance," in which they will still insure your home, but at a far higher cost. They will recoup their money at foreclosure derived from the proceeds of the sale of your home. Ask your attorney what your financial obligation might be under this scenario.
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Tips & Warnings
If you cannot afford an attorney, contact your legal aid society for help.
Some people advise dropping your homeowner's insurance if you are going to lose your house. But, as long as you are the owner, remember that you are legally liable for any damages or loss. It is best to find a way to continue carrying your homeowner's insurance policy.
