While reviewing your monthly mortgage statement, you notice an unfamiliar charge – an LPHI charge. What is this charge? If you’re remotely tech savvy, you have already Googled the acronym and discovered that LPHI stands for Lender Placed Hazard Insurance. Okay, so now you know what it means, but why is it on your statement? LPHI is a form of insurance placed on a property by the lender (your mortgage company) to protect their own interests in the event of a disaster occurring. This type of insurance is typically only instigated if a homeowner fails to provide adequate coverage for their purchased home.
As a homeowner, you are required to provide an insurance policy for the mortgaged home or property covering all possible hazards – natural or otherwise. This is typically listed in the terms of the loan, and you have to provide proof of the policy to the mortgage company during the purchasing process. If, at any time during the loan, the homeowner’s policy is cancelled or altered in any way, the mortgage company will be notified. If you do not provide proof of another policy, or if the mortgage company is unsatisfied with the coverage of the new policy, a Lender Placed Hazard Insurance policy will be enacted by your mortgage company and added to your monthly mortgage payment.
If you have insurance coverage, but your lender has added an LPHI to your mortgage statements, you may want to contact them to discuss the reason behind the addition of their insurance. LPHIs are, on average, more expensive than a third-party homeowner’s insurance. If you did not receive any prior notification of the insurance addition, contact a real estate attorney immediately as mortgage companies are required by law to notify the homeowner in advance.