Question about required flood insurance amount

[Paula Sims]

Can anyone tell me whether or not it is legal for a Bank to demand that a homeowenr secure more flood insurance than the outstanding loan amount? I currently owe $105,000, however the bank is stating that they demand the higher of: the outstanding amount of the loan or 80% of the hazard coverage ($350k), up to $250k. My insurance company never heard that (they are one of the few good guys). Is the bank getting a kickback?

I COULD pay off the mortgage if I wanted to but we need new windows ($40k) and a new car. That would save us $3100 per year. Thanks to money from my Mother I have enough to cover but that would leave us with almost nothing left.

Thoughts?

Thanks

[ok_cpu]

1. Probably not getting a kickback but

Looks like they might be wrong. It's the least of the NFP max, loan balance, or insurable value.

https://www.fema.gov/faq-details/Flood-Insurance-Requirement

[marybourg]

6. The 80% of the hazard coverage ($350k),

is a surrogate for the insurable value.

[yeoman6987]

2. It's normally the value of the home

Do you want to have nothing to rebuild? If you only get what is owed that's all you'd get which is what would go to the bank and you'd get nothing. The best is to overinsure so you have enough to cover full rebuild with possible additions you didn't think of when you built the first time. Lol.

[tammywammy]

3. Insurance should cover the cost to rebuild, not the mortgage amount.

If your house is flooded, would $105k cover the cost for gutting and redoing the entire inside from the studs?

[caraher]

4. Looks like they can

From https://www.helpwithmybank.gov/get-answers/insurance/flood-insurance/faq-flood-insurance-18.html... see the last line:

The amount of insurance coverage required under the Flood Disaster Protection Act (FDPA or Act) is the same regardless of how the insurance is placed. The minimum amount of flood insurance necessary to meet the Act’s requirement is the lesser of:


The outstanding principal balance of the loan(s), or
The maximum amount of insurance available under the National Flood Insurance Program (NFIP), which is the lesser of:
The maximum limit available for the type of structure, or
The insurable value of the structure.

For single-family and two-to-four family dwellings and other residential structures located in a participating community under the regular program, the maximum amount of flood insurance available is $250,000. For non-residential buildings, the maximum amount of flood insurance available is $500,000.

Lenders, however, are permitted to require more flood insurance coverage than the minimum required by the Act.

[mitch96]

5. You could get a independent engineer to asses your flood insurance need

I live in Coastal Florida (6 miles from the coast) and got whacked with a increase. The insurance company just looked at "general" numbers for my area and raised my rates accordingly. I had an independent engineer/surveyor check out my plot and I'm THREE FEET over their number. My rates came right down after submitting the survey. I guess they just shot gun the numbers to make more profit.
The other thing would be to get another mortgage with a different lender who is more sensitive to your situation...
Good luck,
mitch