During Foreclosure, Do I Have to Pay Homeowner’s Insurance?

Most first-time homeowners don't realize that their homeowner's insurance payments are likely to be paid out of an escrow account controlled by their mortgage provider. This arrangement exists to prevent homeowners from lapsing on their homeowner's insurance payments. With the cost of this insurance bundled into the cost of their existing mortgage, relatively few homeowners become delinquent on their insurance policies.

If you've enjoyed the fruits of this arrangement for the bulk of the time that you've lived in your house, you may wonder what will become of your homeowner's insurance policy after you become delinquent on your mortgage. Once your lender begins to foreclose on your property, you'll need to remember a few important things about your ongoing relationship with your homeowner's insurance provider. Since you'll already be experiencing a period of severe economic hardship, you'll want to take steps to ensure that you don't throw more money down the drain.

If you fail to make your homeowner's insurance payments once you've become delinquent on your mortgage, you'll likely be forced to take out an even more expensive insurance policy known as "place insurance." In most cases, you'll be compelled to do so by the bank that underwrote your mortgage. Your obligation will be enforced by a judge's order that won't be severed until the foreclosure process has ended.

Until you're physically forced out of your home, you'll need to continue to make place insurance payments. These payments will be added on to the final court bill that you receive for the foreclosure. You won't be reimbursed for these costs under any circumstances. Since the cost of place insurance can exceed that of your current homeowner's insurance policy by a factor of five, it's in your best interest to ensure that you remain current on your homeowner's insurance policy.

If you're unable to continue making your homeowner's insurance payments, you may need to work with your lender and the court overseeing your foreclosure to expedite the bank-seizure process. This will ensure that you're not hit with bills for place insurance. If you fail to make your homeowner's insurance payments, you may be held liable for any damages to your house. The cost of these damages may be added to your court costs for the foreclosure and could set back your finances at a particularly inopportune time. Although it may seem difficult and wasteful, it's in your interest to stay current on all of your home-related obligations until your foreclosure has been completed.

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