I unfortunately spent a large portion of my 20’s working in collateral loan insurance tracking. If you’re unfamiliar with the term, you’re not alone – I spent the better part of my 30’s explaining it to regulators. The general idea is any time you have a loan on a collateral (i.e., a car loan or mortgage), you have certain insurance requirements to maintain throughout the life of the loan.
If you don’t maintain your insurance, third-party vendors, such as QBE First and Assurant, Inc., find the deficiency on your loan and force-place an expensive, proprietary brand of collateral protection insurance on it. Your taxes and insurance is escrowed, and any existing escrow account is emptied, as the premium for this force-placed insurance policy is applied to your monthly loan payments, skyrocketing them beyond your means to pay.
You soon find yourself in foreclosure, using public transportation to make ends meet because your car was repossessed as well. My team queried certain parameters within big data in order to find loans such as yours, and we were the best of the best. If you anyone money for your car or home, be aware of these insurance flags on the backend tracking system:
- Maintain Minimum Contractual Limits
If you refinance your home, pay attention to the insurance limits on your mortgage. You may be required to keep your insurance up to the property value, rather than the loan balance. Refinancing at the right time may gain you equity, but if you don’t raise your insurance coverage to match, you’ll find yourself saddled with a force-placed insurance policy.
- Monitor Monthly Statements
If there’s a problem with your loan, it’ll usually be indicated on your monthly statement. Pay close attention to every correspondence sent by your lending institution, loan servicer, or bank. Like cancer, if you catch an escrow, interest, or insurance hiccup early, you can cut it off before it spreads.
- Keep All Documents
Always have all your loan and insurance information saved in chronological order. You need to maintain records in order to prove you have insurance. It doesn’t matter until disaster strikes, and when you’re in an accident or your neighborhood is flooded, you’ll be glad you can prove your insurance coverage.
- Never Trust Your Bank
Banks are great for keeping money safe, but they don’t necessarily care whose money it is they’re keeping. If you don’t keep an eye on your financial institutions, they’ll charge you every fee in the book because “that’s the fee for doing business, sir/ma’am.”
Banks routinely do business behind the scenes. You can be a perfect customer, and your loan can change hands, completely changing your loan terms without your knowledge. The mail forwarding could have a hiccup, and you could wind up with a lost payment and lose your home over an internal bank mistake.
Keep an eye on your statements, and maintain insurance. Always make sure your bank and insurance company are aware of each other. Take the precautions up front to avoid a costly financial and emotional loss down the road.
Brian Penny is a former Business Analyst at Bank of America turned whistleblower, freelance consultant, and troll. He’s a frequent contributor to The Street, Huffington Post, Cannabis Now, and Fast Company.