Flood Insurance rate controlled by escrow company?
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UPDATED: Feb 13, 2015
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Insurance Question from Sun, AZ
Asked on 02/13/2015
Flood Insurance rate controlled by escrow company? Flood Insurance: My insurance provider wants me to have sufficient flood insurance (I live in a FEMA flood zone) to cover the balance of my home loan. FEMA is okay with this too. However, my Escrow and home loan provider (BoA) insists that my flood coverage match my previous Hazard Insurance value (much higher). It's especially frustrating since I didn't choose my loan provider- my loan was sold to them. Is this common? It seems like the insurance company should be the ones calling the shots.
Answer given on March 10, 2015
Flood insurance is very frustrating to people because lenders are more rigid on how they will require the insurance. The maximum amount of insurance available is $250,000 and, like the standard homeowner policy, the lender wants the maximum amount of insurance, or the replacement cost of the home to be the amount of insurance. The loan amount is not considered when the insurance is put into place.The problem with flood insurance is that it is so much more expensive than standard homeowner insurance.You can ask the lender to reconsider the required amount of insurance, but they will most likely decline. You must insure the home to its replacement value, or the maximum amount available to get replacement cost coverage on the home. If it is underinsured, then the settlement amount will be less than the amount of the loss.
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