Blanket Insurance vs. Lender-Placed Insurance: What’s Right for Your Institution?

Lenders must balance strong collateral protection, regulatory compliance, operational efficiency, and borrower relationships. One of the most important decisions in that effort is choosing between Blanket Insurance and Lender-Placed Insurance (LPI), or determining whether a combination of both makes sense.

While both approaches protect lenders when borrower insurance is insufficient or lapses, they work very differently.

What Is Blanket Insurance?

Blanket insurance provides portfolio-wide coverage that automatically protects eligible collateral across a lender’s book of business.

Benefits:

• Fewer coverage gaps and less uninsured exposure
• Reduced administrative workload
• Smoother borrower experience with fewer lender placed notices

Challenges:

• Higher upfront cost for the institution
• Less ability to charge costs directly to non-compliant borrowers
• Reliance on in-house compliance controls that, if not structured properly, can still leave gaps that create regulatory exposure

What Is Lender-Placed Insurance (LPI)?

LPI is placed on individual loans when a borrower fails to maintain required insurance.

Benefits:

• Costs can be charged directly to the borrower
• Flexible, loan-by-loan approach
• When paired with a strong insurance tracking program, LPI can provide a meaningful compliance advantage by creating clear documentation, notice trails, and defensible placement decisions

Challenges:

• Requires significant monitoring and documentation
• Potential timing gaps between lapse and placement if tracking is not well managed
• Can create borrower dissatisfaction due to higher premiums

Which Should You Choose?

Blanket insurance may be best if you:

• Want consistent, portfolio-level protection
• Prefer streamlined operations
• Manage a large or diverse loan book
• Are not concentrated in high-catastrophe coastal regions, where portfolio-wide exposure can materially impact blanket premiums

Lender-placed insurance may be best if you:

• Prefer a loan-by-loan approach to insurance placement
• Have strong insurance tracking processes in place that support compliance and audit readiness
• Want to avoid paying blanket premiums for well-insured borrowers

Final Thoughts

There is no universally right or wrong choice between blanket insurance and lender-placed insurance. The best approach depends on a lender’s risk appetite, geographic footprint, operational capacity, and overall portfolio goals.

In practice, it does not always have to be one or the other. Many institutions find that a combination of both programs offers the most effective balance of risk protection, compliance strength, and operational efficiency. In fact, a significant portion of TEJ Agency's clients deploy integrated strategies that incorporate elements of both blanket coverage and LPI.

Because TEJ Agency supports both solutions, we are not incentivized to recommend one over the other. Instead, we work with lenders to evaluate their unique needs and structure a comprehensive collateral protection strategy that aligns with their objectives.