Homeowner's Insurance Law Benefits Homeowners

Have you noticed that your homeowner's insurance policy is not in line with the current value of your home? I am not referring to the assessed value here. I am also not referring to the fact that FL homes are now selling for 70% of the value to rebuild them. I am referring to the cost to rebuild with complete replacement value.

Noticing that mine was way out of line, I felt it prudent to contact my agent. The agent ordered a complete replacement cost valuation and submitted it to the carrier. Apparently, the carrier notified the servicer of the mortgage who promptly generated a letter stating, "A review of your homeowner insurance policy indicates that your property may not be adequately insured in the event of a loss. We encourage all borrowers to obtain coverage adequate to protect the full replacement value of their dwelling. We require that homeowner insurance coverage be at least equal to your outstanding loan balance (up to the replacement value of your home) or 80% of the replacement value of your home, whichever is greater."

Once again, I phoned my carrier. As I read the above statement to insure that my policy did indeed fall within the guidelines, I was halted by the comment, "That is illegal in the state of Florida"! I was informed that the Florida statute specifically states:

4-167.009 624.308

“No mortgage lender shall, in connection with any application for a mortgage loan in this state which is secured by a mortgage on residential real estate located in this state, require any prospective mortgagor to obtain by purchase or otherwise a fire insurance policy in excess of the replacement value of the covered premises as a condition for granting such a mortgage.”

My agent further stated that only the home and not the land is considered for this requirement. Insurance carriers inflate the value yearly anywhere from 7%-25%, depending on who the carrier is. Well, no wonder the value was out of line (over $100,000 of cost to rebuild and over my loan balance by over $70,000)! It was further stated that if the servicer presses the issue, to require them to provide a full appraisal and not a drive-by appraisal. Interesting.......

My advice to each and every one of you is to contact your insurance agent immediately to verify that you have the adequate insurance required by law in your individual state, and obtain a present replacement cost valuation. As the value of homes has dropped "like a rock", you owe it to yourself to cut your unnecessary expenses. Mind you, you are not circumventing any law, jeopardizing your home or coercing anyone to do anything which violates law. The bottom line is that we don't seem to be able to trust anything the servicers are putting out there anymore. Fancy that......, trying to coerce the unsuspecting homeowner into violating the law! How OVERINSURED are you? Pass this along to every homeowner you know. Prevent insurance fraud!

FL Statute
https://www.flrules.org/gateway/ruleno.asp?id=69O-167.009