Going Bare

After windstorm insurance skyrocketed following the devastating 2004-2005 hurricane seasons, many property owners gambled and cancelled the wind portion of their property and casualty policies.

Now, more commercial and residential property owners, faced with tighter budgets, are finding other ways to lower their insurance costs. Strategies include reducing or eliminating optional umbrella coverages (coverage that exceeds the limits of an underlying policy), reducing other coverage limits, increasing deductibles, and in some cases “going bare” — meaning not renewing property insurance even when required under the terms of a mortgage.

When property owners don't renew insurance per the common boiler-plate terms of a mortgage, they get letters from the lender or its third party vendor reminding them their legal obligation to maintain property insurance. And if they fail to renew by the expiration date, a borrower is technically in default. The lender can then protect itself with “force-placed” insurance that kicks-in automatically.