In a recent Insurance Journal article it was noted that Massachusetts is looking at capping the amount of flood insurance mortgage lenders may require of homeowners.
The proposed legislation would prohibit creditors from requiring homeowners to purchase flood insurance in an amount that exceeds the outstanding balance on their mortgage, requires coverage for contents or includes a deductible of less than $5,000.
This is all in an effort to help homeowners facing significant insurance increases due to FEMA’s updated and expanded flood zone maps.
Additionally, the proposed legislation would require banks to provide a notice to homeowners explaining that the insurance coverage would only protect the current mortgage interest, but that it may not be sufficient to pay for repairs or property loss.
With the flood maps being redrawn, insurance rates will not only increase for those already in the flood plain, but many homeowners and small businesses will be required to buy flood insurance for the first time.
Flood insurance is compulsory for property owners with mortgages located in certain zones on Flood Insurance Rate Maps. These homeowners and businesses have no choice, nor do the banks that service their mortgages, but to have flood insurance. Even properties in the new flood zones that do not have mortgages may still be affected, due to heightened building requirements or lower market demand for those properties.
This is all important news for restoration contractors in the state of Massachusetts as it will reduce the amount of insurance available for payment on claims.