Yesterday, we dove into the nitty-gritty of the foreclosure process. Today we answer the more specific question of what foreclosure means for your homeowner’s insurance policy.

During foreclosure, you are still responsible for the house. And that means things like structural damage, personal property theft, and injury to others (things that your homeowners policy would protect against) are your obligation. If you don’t keep up your policy and damage occurs, you’ll be hit with yet another bill to pay.

It’s a complicated topic, so let’s take a closer look at how it all breaks down.

Escrow accounts

In some cases, your homeowners insurance is paid through an escrow account that you agree to when opening your mortgage.

Escrow accounts are used to cover property taxes and homeowners insurance. Yearly insurance and tax dues are divided by 12 and rolled into the monthly mortgage payment. That way, homeowners don’t have to worry about covering the bills separately.

If you’re facing foreclosure and have an escrow account, it’s possible that the bank will continue paying your homeowners insurance and add the costs to the already accumulating debt.

But, if the bank doesn’t cover insurance costs, your mortgage company will likely alert you that you must purchase a pricier “place insurance” policy. In these cases, you’ll be legally responsible for insuring the home (unless you are evicted) until the foreclosure process is over.

Facing foreclosure without an escrow

If you pay for your homeowners policy separately from your mortgage, the process is pretty straightforward. You must continue to pay the bill, and if you can’t afford it, it’s important to contact your insurance company.

There are some ways to soften the financial blow including switching from quarterly to monthly payments in order to make the immediate cost more manageable. And if the policy requires payments made in advance, any overages can usually be refunded once the foreclosure process is over.

Learn more about homeowners insurance

The ins and outs of homeowners insurance (during foreclosure and otherwise) can be tricky. Luckily, you don’t have to figure it out on your own. Feel free to call our expert insurance advisors (1-866-439-5633) or visit us on the web for more information about homeowners insurance.

And be sure to check back soon when we conclude our foreclosure series with some important tips for purchasing a foreclosed home or short sale

Homeowners 101


about Jennifer

A Motor City native, Jennie spent a few years knee-deep in automotive before heading to San Francisco to join the Esurance team as a copywriter. In addition to words, she’s a big fan of running, Detroit Tiger baseball, and the Trader Joe’s cheese aisle.