Q: Force Placement 7 – May a lender commence a force-placed insurance policy on the day the previous policy expires, or must the new policy begin on the day after?
A: The Regulation provides that the lender or its servicer may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance, including premiums or fees incurred for coverage, beginning on the date on which flood insurance lapsed or did not provide a sufficient coverage amount.
A lender, however, may not require the borrower to pay for double coverage. The Regulation requires the lender or its servicer to refund to the borrower all premiums paid by the borrower for any force-placed insurance purchased by the lender or its servicer during any period in which the borrower’s flood insurance coverage and the force-placed insurance policy were each in effect.
For example, if the previous policy expires at 12:01 am, the lender’s new force-placed policy should not begin to provide coverage until 12:01 am of the same day. If the lender did force place at a date and time that would result in the force-placed policy providing overlapping coverage, the lender should not charge the borrower for the period of overlapping coverage.