|Published:||Sep 13, 2012 6:06 PM EDT|
|Updated:||Sep 13, 2012 6:50 PM EDT|
NAPLES, Fla. - You could be overpaying for home insurance by thousands of dollars. Call For Action investigates the practice of "force-placed insurance" where banks and mortgage holders dictate your insurance.
This spring, thousands of homeowners found themselves living in a flood plain after FEMA updated the maps in Collier County for the first time since 2005. Those homeowners, like Dorothy Rosevelt of Naples, were told they need to get flood insurance.
"I knew it was coming, but I was shocked when I saw that price," said Rosevelt, referring to the price from her bank.
The quote from her mortgage holder was $3,220 a year, which she would have been forced to pay if she didn't get her own plan. After one phone call to her private insurance agent she was quoted $285. Less than 10% of the premium on the bank policy.
"I knew it would be better, I just didn't realize how dramatically different it would be," Rosevelt said.
That's when she called us, and we contacted Keith Rossell with Carlock and Associates, an insurance provider in Lee County. He doesn't represent Rosevelt, but he sees a lot of clients who are forced into overpriced insurance.
"It is very common," Rossell said, "when we get those calls and emails, any agent is gonna know right away that any premium the bank is charging is going to be significantly higher."
So why the drastic differences?
Many homeowners are force-fed insurance because they didn't reply to their banks notices and let their coverage lapse. The banks, in that situation, treat the homeowner as a risky customer, the same as if you had missed a mortgage payment. Banks also argue the force-placed insurance protects their investment.
But all 50 State Attorney's General took action against banks forcing insurance policies on people. The states recommended that limits be placed on the ability of banks to use force-placed insurance. It's part of a $25 billion national settlement with the top five mortgage servicers.
The Consumer Financial Protection Bureau is also taking action, calling for stricter rules on the practice including more transparency.
"It's a mystery to me and my suspicion is that they're making a lot of money on it," Rosevelt said.
That's the same suspicion of the Superintendent of New York State's Department of Financial Services. In January, The New York Times reported several major banks, including JP Morgan Chase, Bank of America, Citigroup and Wells Fargo were being investigated for the practice of force-placed insurance.
But you can also take matters into your own hands. The first step is to check your mail carefully.
"Open the mail up and do your due diligence as a consumer and protect yourself," Rossell said.
Rossell recommends you contact your bank and your private insurance company right way and buy a better policy.