As a result of the turmoil caused by FEMA redrawing the coastal flood maps the Massachusetts Legislature passed and the Governor signed a new law designed to give MA residents some premium relief. The law was effective 120 days from the signing which by my calculation was mid-November.
There are three main components of the law.
- Lenders cannot require homeowners to carry more flood insurance than their outstanding mortgage balances.
- Lenders cannot require homeowners to have less than a $5,000 deductible. And,
- Lenders cannot require homeowners to insure their contents against flood.
As I mentioned last week most homes in newly designated flood zones are eligible for the Preferred Risk Program (PRP) and can buy full coverage at a reduced rate. If you qualify for the PRP you should take advantage of it. The changes listed above should only be used if you are not eligible for the PRP and feel you can't afford the full cost of flood insurance.
Of course, the down side is that if you buy the flood insurance at the reduced level and then suffer a loss it may not be enough. You should talk with your insurance agent before you decide to reduce your coverage!