What happens if a homeowner does not maintain homeowner's insurance?

If a homeowner does not maintain homeowner's insurance, the lender may choose to force-place insurance on the property. This means that the lender will arrange for insurance coverage to protect their interest in the property and ensure it is covered against potential risks such as fire, theft, or other disasters. The reason lenders do this is to reduce their exposure to financial loss if the property were to suffer damage and become uninhabitable.

Force-placed insurance is typically more expensive than a homeowner could obtain on their own and may not provide as comprehensive coverage, which is why it’s crucial for homeowners to maintain their own insurance. This measure is also performed as a protection mechanism for the lender since the mortgage agreement often requires homeowners to keep insurance in place throughout the term of the loan.