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3-NN-Column-mugBy Mike Causey

Q: I have a modest waterfront home, with a mortgage, and I am getting hammered by insurance premiums — even some that my bank is slapping on me, where they say I am under-insured. I’ve got fire, wind and hail, flood, liability, and now what I call these under-insured premiums, which ends up increasing my monthly mortgage payment. 

This seems like it is a blatant ploy for the lender to make more in the way of fees, etc. Can you offer your insight into what is going on here, and what are my remedies?


Homeowner in eastern North Carolina 

A: The mortgage contract you have with your bank no doubt requires you to carry insurance on your home. If you fail to have the required insurance, the bank will buy a policy for you. This sounds reasonable since the bank, as the lender, wants to protect its investment.

As you well know, you and other homeowners residing in the coastal counties of North Carolina feel the pinch every month when the insurance premium checks are written. So when the bank buys additional insurance coverage, this is often an additional, and sometimes hefty, burden on the homeowner. In part because the bank’s insurance is generally more expensive than homeowners insurance through a local agent.

This same practice applies to flood insurance as well. There are homeowners who already have flood or hazard insurance, or feel that may not need that coverage, and cannot understand why they’re getting letters from the bank after the fact.

Complaints have been lodged against some bank practices regarding insurance in all 50 states. The Attorneys General in every state have recommended that limits be placed on a bank’s use of “force-placed insurance.” When that initial bank notice letter is ignored or forgotten, the homeowner will see new insurance bills in short order — which is 45 days for some banks — according to recent reports. Banks should remove the policy and the charges once proof of insurance coverage is provided to them. But the main thing here is that it is urgent that the homeowner respond to those bank insurance letters, or face serious and costly consequences.

In view of the current situation, your remedies are few and far between. Ideally, purchase adequate insurance coverage through your local insurance agent, or through the Coastal Property Insurance Pool or Beach Plan, or be independently wealthy to afford any losses incurred.  Insurance products offered through the Beach Plan are: Fire insurance, Homeowners insurance, Windstorm and Hail insurance, and Crime coverage.

Editor’s note: Mike Causey lost a close race for Insurance Commissioner in the 2012 North Carolina elections. If you have an insurance question, e-mail him at: