Retroactive homeowners insurance

[manshack_one]

Here's my situation right now. I'll just copy/paste from an email I wrote. Sorry for the lengthyness.

Recently I had an issue with Beneficial concerning Homeowners Insurance. Basically I had let my homeowners insurance lap starting in Nov '07
due to non-payment. Basically couldn't afford the insurance. Well, recently I received a letter from Beneficial saying they received notice from
Encompass (my previous insurer) that we weren't covered. The letter also stated that if I didn't get coverage they would automatically sign me up for insurance through Beneficial and adjust my mortgage accordingly. Being that my employment situation had improved I purchased insurance through Travelers and began making payments. I informed Beneficial of my new coverage and was told that it was in time for the automatic coverage to not go into effect except for a small period of time (several weeks) between their automatic coverage date and the start date of my Travelers policy. I never received anything saying how much that small period of time was going to cost so I left it alone and resumed entering my normal mortgage payment into my checkbook. Yesterday I received my statement from my bank and noticed that Beneficial had taken out an extra $250 last month and will be taking out $200 extra dollars this month. Basically figuring they had made a mistake and not entered my new coverage into their computer system I called and spoke with customer service. What they told me was that the extra money was for coverage over the 11 months that I let my insurance lapse. Basically retroactive coverage that will continue to be taken out of my account for the next 9-10 months. Can they really do that? Backdate a policy and charge you for it day forward? I didn't make any claims during that period and even survived both hurricanes that came through without any damage. Shouldn't it be more of a no-harm no-foul situation? Couldn't I be offered an option to sign a paper saying I will never be able to file a claim for that period of time? How can they charge you for something you never used? And most likely, even if I made up a claim for that time period I'm sure they'd refer me to my current insurer which is Travelers or tell me the claim was too long ago. So basically I'm having to pay for something I didn't use and in most cases will probably not be able to use over the next 9-10 months that I'm paying for it. How is that fair to me as a homeowner?

The difference each month is about 200 bucks. So, being that I only wrote down my normal mortgage payment I have to correct my checkbook and deduct this extra $400 since it's been two payments before I noticed. Lucky me I suppose that I didn't bounce a check.

[Bruce Brown]

Your mortgage documents give them the right to force place insurance on you if you don't provide them proof of coverage.

Your first step would be to pull your closing documents and review the document that you signed at closing that gives them this right. You need to ensure that nothing has been done out of line with what you agreed to when you closed. That document will provide you with the answer to your question.

If you have secured new insurance and provided proof of such they cannot collect twice.

You can stop them from being able to automatically debit money from your acccount by talking with your bank.

[manshack_one]

I get what you're saying Bruce and I'll check those papers tonight. They aren't really collecting twice. I didn't have coverage for 11 months so basically they wrote up a policy to cover that time and started charging me for it now. So what I'm paying for I can't really use because the policy ended on the effective date of my new Travelers policy which started last month. What Beneficial's letters were about dealt with day-forward coverage. No one's ever said anything about retroactive coverage.

Generally speaking, what sense does it make to backdate an insurance policy? We've had 2 hurricanes and a tropical storm come through here during that time. Maybe they'd like to know about the new roof I need and my cracked foundation or that sinkhole in the backyard. Maybe then they'd rethink retroactive policies.

[Bruce Brown]

I misunderstood on the collecting twice but what they usually do is a 'self-insurance' effective as of the date of your lapse. If you can't prove coverage after that date they'll force it on you and then take out a policy at a significantly higher rate than you'd normally pay.

All they're interested in is protecting their collateral so just because something didn't happen while the policy lapsed means nothing to them because they likely self insured it for a short time.

[manshack_one]

Ok. That makes more sense considering the self-insurance. But, they have said they didn't know it wasn't insured until July of this year. That's 9 months that they weren't aware of. So, they self-insured all the way back to Nov '07? I guess they verify that every 6 months or something.

[Bruce Brown]

The paperwork that you have should tell you exactly what they can or can't do. It could be possible that they can't go backwards that far.

[maxjlone]

Homeowners approached to buy this kind of insurance are urged to contact the Ohio Department of Insurance.
COLUMBUS — Ohio Department of Insurance director Mary Jo Hudson is warning victims of the recent floods in northern and central Ohio to beware of individuals who may be selling bogus flood insurance policies.
The department has received reports of people trying to sell retroactive flood insurance policies, claiming that if a homeowner purchases a flood insurance policy, the policy will cover any damages incurred during this latest flood. There is no such thing as a retroactive flood insurance policy, said Hudson.

[bridges]

The natural catastrophes such as floods and hurricanes make the insurance companies too cautious especially with the policyholders who filed too many claims. So it was good for you not filing any claim.

[pdisme]

Just curious if the original poster ever had any success fighting the forced retroactive policy? I've just been the victim of a similar policy; basically July '08 my insurance company didn't notify me, my agent or mortgage company (Regions) that it was renewal time, it lapsed, Sept '09 I personally realize hey I haven't paid insurance in a while and go find out what happened. I purchase a new policy from a different company through a different agent, the notification of coverage sent by the new company clues someone at Regions in that there was a lapse, three months later I get a letter saying hey, you had a 14 month lapse so you now owe us $14k for the plan we've just purchased on your behalf covering July 08 to Sept 09, i.e. a retroactive force-placed policy.

I've spoken to an attorney who said the mortgage docs allow this and unfortunately since it's a retroactive policy, I'll never have any success trying to find an insurance company that will actually sell a consumer policy retroactively even though the house is obviously still intact. I have no options with the state insurance commissioner because force-placed policies are in the name of the bank and not me, and obviously the bank is not going to file a complaint about their own affiliated insurance company. I did try to find an insurance company who would sell dwelling-only no liability retroactive insurance and, as the attorney suggested, I was not successful.

I think I've exhausted all options and will just have to grin and bear it but if anyone has some suggestions or ideas I'm open to hearing them.