How Does Foreclosure Effect a Homeowner Property Insurance Claim?

J.P. Gonzalez-Sirgo
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Founder of J.P. Gonzalez-Sirgo, P.A.

Typically, payments of homeowner insurance are still required even after a home has been foreclosed. Lenders often create escrow accounts to ensure that the policy will continue to be paid for despite the insolvency of the debtor. This allows for continued coverage of homeowner property damage while the foreclosure proceedings are being wrapped up. However, this is merely to ensure protection of the home during this process. The debtor still must pay any costs incurred for maintenance of the house, including homeowner insurance payments because the lender is not legally responsible for these additional payments. Outstanding payments covered by lenders is only temporary relief that requires repayment after a certain period of time depending on your individual circumstances surrounding the foreclosure.

The lienholder’s interest in the collateral (your home) is why policies usually require the mortgage holder to be the payee on any settlement drafts. This is a precautionary measure to keep the property repaired in the case of a foreclosure to prevent further damage created by lack of mitigation. Resale value of the collateral could be reduced by further damage, making it of the utmost importance to lenders to keep the home in the same condition it originally was in.

However, not every policy is the same making it important you read your contractual language with care. For example, certain policies do not cover personal property and living expense clauses, making them not subject to outside lien interests. These reimbursements are typically made directly to the policyholder without the need of a mortgage holder endorsement. Florida Statute § 627.70121 titled “Payments of Claims for Dual Interest Property” reiterates this concept.

Not only do lien-holders interests need to be taken into account during foreclosure but also do the interests of other third parties such as assignees, representatives of a deceased, trustees and other interest holders. Foreclosure is often a stressful process due to the demands of various parties, so it is important you consult an experienced insurance claims attorney to help you understand what finances you will be required to pay or can delay for homeowner insurance, and to give you a deeper understanding of foreclosure from a legal lense while simplifying the repayment process for you.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected]

Sources:

-17 Fla. Prac., Insurance Law § 14:7

- Florida Statute § 627.70121

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