Is there an Impairment in your Mortgage Impairment Policy?

Questions are flooding in on this one…

You have mortgages. Your mortgage customers are supposed to buy insurance on their property.

What if they don’t?

If you know your customer has no insurance, you “Force Place” the insurance.

What if you don’t know?

Mortgage impairment insurance protects your bank from the-peril-of-no-insurance.  They were supposed to buy insurance. They didn’t. The building burns. They walk away. Mortgage impairment pays for the lost value or mortgage loss or repair costs so as to protect your bank.

What perils (causes of loss) are covered?  Usually, the basic mortgage impairment policy covers “required perils.”  In other words, the policy pays for the causes of loss that the customer was supposed to buy.

So far, so good.  You undoubtedly require fire, lightning, windstorm, hail… The  big stuff. For properties located in flood zones, you require flood insurance.

Most of your customers don’t have to buy flood insurance, as their homes are not near the water or in flood-prone areas.

What if the flood waters hit outside of flood areas?

In fact, well over sixty percent of flood losses in the US are outside of flood zones.

What if your bank has twenty loans on non-flood-zone properties devastated by a flood?  What if ten of the damaged properties go into foreclosure?

This is the gap that exists in about two-thirds of the mortgage impairment policies I review.

Ask your insurance agent if you have mortgage impairment coverage for flood when flood is a required peril.

Ask your insurance agent if you have mortgage impairment coverage for flood when flood is not a required peril.

Ask your insurance agent if you have mortgage impairment coverage for telling a customer she does not need flood insurance but it turns out the property is actually in a flood zone.

Of course, you can also call me for answers too.