How to Keep Insurance Escrow During a Foreclosure

Even in foreclosure, you are responsible for damage done to the property.

During the process of purchasing a home, an escrow account is set up with your mortgage lender in order to pay for expenses associated with the property, including homeowners insurance. Most lenders require that you purchase homeowners insurance before setting up the escrow account. In the unfortunate event that you go to foreclosure, you can continue to maintain your homeowners insurance to protect yourself and the property against damaging disasters while the foreclosure is in process. While you are in possession of the property, you are still liable for damages that occur to the property in the event of a fire, flood and other damaging disasters. Keeping homeowners insurance during foreclosure helps to cover charges associated with repairing the damages.

Instructions

1. Find out if your lender has forced insurance. This is when the lender keeps up with the insurance payments on the home and adds any costs to the default loan amount. If there is forced insurance on your property, you don't have to do anything else because the house is still covered.

2. Go over your insurance agreement. Homeowners insurance is taken out of your escrow account along with your mortgage payments. If you are missing your mortgage payments, most likely you are not paying for insurance either; which will cancel your policy. Your insurance agreement will list how much the payments is, when the payment is due and other ways -- besides escrow -- to pay the premium. Get the name and phone number of your insurance company and agent from your insurance agreement.

3. Contact your insurance agent. Ask if your homeowners policy is still current and how to keep up the payments during foreclosure. If it isn't current, ask how to make it current again.

4. Pay the insurance company to bring the policy current. Pay any late fees and charges. Set up an arrangement with the insurance company to continue making payments until the home is out of foreclosure.

Tips & Warnings

• Forced insurance is a topic of debate for some homeowners who don't want the extra charges added to their default-loan amount. If this is the case for you, contact your lender to inquire about obtaining insurance on your own.

References

• LawInfo.com: A Homeowner's Rights During Foreclosure
• Expert Foreclosure Help: Homeowners Insurance and the Foreclosure Process
• Bella Online: What is Forced Placed Insurance?

Resources

• ABC News; Insurance Frustration; Chris Cuomo; 2010