How exciting; you are buying a home. How much insurance are you really required to purchase?
Back in the day when banks and mortgage companies could lend 100% or more to finance your new purchase, often the insurance agent placing the coverage would be asked to increase the dwelling amount to at least match the loan amount; regardless of the actual replacement cost on the dwelling. This practice is no longer allowed.
I have a friend of mine to thank for making me aware; only she lives in Florida. Florida law states that a lender can not require the borrower to insure the purchase for anything more than replacement cost; regardless of loan amount. So, this got me wondering if Ohio has the same or similar type of law.
I contacted Colin Evans at the Professional Independent Agents Association of Ohio, Inc ( PIA ). It took some research but, low and behold, Colin found it!
Ohio Revised Code 3901.211 (B)(10) addresses replacement value:
(10) As a condition of financing a residential mortgage or providing other financing arrangements for residential property, including a mobile or manufactured home, require a mortgagor or borrower to purchase homeowners insurance coverage or other residential property insurance coverage in an amount that exceeds the replacement value of the dwelling and its contents, regardless of the amount of mortgage or other financing arrangement entered into by the mortgagor or borrower. The fair market value of the land on which the dwelling is located shall not be included in the replacement value of the dwelling and its contents.
This also applies to those who may be in the market to refinance their loan. Don't fall victim to persuasion from pushy lenders; check your facts first.
As an independent insurance agent for nearly 30 years, I'm always pleased to find something new that I can pass along to the consumer. I thank Colin Evans for his dedication to finding this information for me.
Terri Lyn Reed, LUTCF
March 25, 2014