New Florida force-placed insurance regulations now in effect

Force-placed insurance - Regulations

As of last weekend insurers and mortgage lenders have new rules to which they must comply.

Starting on July 1, Florida force-placed insurance regulations have been updated, requiring insurers and mortgage lenders to face certain tighter restrictions on the implementation of those policies.

The change is the result of a new bill approved by Florida lawmakers earlier in 2023.

House Bill 793 took effect at the start of this month, with the intention of banning what some have referred to as lender “double dipping.” That occurred when lenders put force-placed insurance policies into effect before the homeowners’ existing coverage had run out.

Force-placed insurance - home insurance form online
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The new law was based on National Association of Insurance Commissioners (NAIC) model legislation. It states that policies put in place by lenders cannot become effective earlier than the lapse date of the homeowner’s policy. Moreover, lender established coverage must also end the moment the homeowner’s new market coverage is put into place.

Force-placed insurance has become highly problematic for Florida homeowners dropped by insurers.

Florida has become a state approaching homeowners coverage crisis. It is commonplace for insurers to drop homeowners. When those homeowners are covered by a mortgage that requires them to have coverage, this triggers lenders to purchase coverage on behalf of the borrower.

The issue is that some homeowners in this situation have pointed out that the new coverage is being put into place – and they are being charged for it – even before their existing policy has run out. As a result, they face double coverage and the notably higher premiums that come with force-placed insurance policies.

A number of states have already adopted similar laws on the same model in recent years. Florida’s new law states that the amount of coverage purchased on behalf of a homeowner must be capped at the replacement cost of the property “as best determined by the last known coverage amount.” Moreover, the new insurer or its agent will be required to request the previous coverage level from the homeowner. If that cannot be obtained, the coverage will be based either on the home’s replacement cost as calculated by the insurer or on the loan’s unpaid balance.

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