The loan balance on my home has decreased over the years so that I now owe $50,000 on my home. I have a new servicer and it is requiring that my flood insurance be increased. My present policy satisfies the minimum flood insurance requirement. Can my lender require more flood insurance than the minimum required?

For example, on a home with only a first lien (no home equity loan or home equity line of credit), an insurable value greater than $50,000 and a principal balance owed of $50,000, the minimum required amount of flood insurance under the Act would be $50,000.

Some lenders may require in their loan agreements that the amount of flood insurance equal that of your hazard insurance so you are not underinsured. The reasoning is that, if the insurable value (replacement cost) of the home is higher than the minimum amount of coverage required and there is a total loss due to a flood, the lower amount—in this case $50,000—might not be adequate to rebuild your home. (Massachusetts state law, however, limits the amount of coverage that a lender may require to the outstanding principal balance of the mortgage loan.)

Last Reviewed: April 2021

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