What are some consideration of Insurance Premium Collections?

• A. Premiums need be collected along with payments
• B. Insurance is optional
• C. lessor may "force place" insurance when evidence is not provided
• D. cancelled insurance may be event of default requiring remedial action

Answer: (C)

When handling insurance premium collections, the priority is to keep the collateral protected. If the borrower or lessee does not provide evidence of the required insurance, the lessor can step in with force-placed insurance. This means the lender arranges and pays for an insurance policy on the asset in the lender’s name and bills the borrower for those premiums, often adding them to the loan or lease payment. This approach ensures there is continuous coverage and that the lender’s security interest remains protected even if the borrower delays or refuses to obtain or prove proper coverage.

Other ideas—such as premiums simply being collected with regular payments—can happen, and insurance cancellation can trigger remedial actions, but the key mechanism tied to safeguarding the lender’s interest when evidence of coverage isn’t provided is force-placed insurance.