Coverage Required

[JGiglio]

What is the name of your state? Virginia

I recently purchased a home and the lender has required me to have insurance coverage for the amount to rebuild the home yet my loan amount is much less than that cost. Can the lender require that I have insurance coverage in excess of the loan amount?

JoeWhat is the name of your state?

 

[ajs09876]

Read this

https://forum.freeadvice.com/showthread.php?t=365842

 

[JGiglio]

I have been told by my insurance company that I do not need to be insured for the replacement cost of the house. Besides the insurance company valued the replacement cost to be $320K whereas the Lender says it is $606K. This is a big difference. I was also told by my insurance company that Virigina has an excess insurance law but I have not been able to locate it on the web.

 

[moburkes]

I don't know anything about the VA excess insurance law, however, you signed an agreement with the LENDER to maintain replacement cost. Otherwise, they wouldn't have given you the loan.

 

[efflandt]

One way you can look at it is, if your home was destroyed (fire, tornado, hurricane) would the land value alone, after demolition costs to clean it up, cover what you owe?

 

[JustAPal00]

As a former loan officer and a current insurance appraiser, I would say that every lender I have ever heard of will require you to have guaranteed replacement cost on your policy. Also you should insure the home for what it would cost to replace it, not what it would sell for. Lets take for example two identical homes accross the streat from each other. The one home (home A) has a cliff side view of the Pacific Ocean out it's rear windows. The other home (home B) has a view of a land fill and interstate highway out it's rear windows. Even though the real estate value of home A would be much higher than home B, they should be insured for the same amount.

 

[moburkes]

As a former loan officer and a current insurance appraiser, I would say that every lender I have ever heard of will require you to have guaranteed replacement cost on your policy. Also you should insure the home for what it would cost to replace it, not what it would sell for. Lets take for example two identical homes accross the streat from each other. The one home (home A) has a cliff side view of the Pacific Ocean out it's rear windows. The other home (home B) has a view of a land fill and interstate highway out it's rear windows. Even though the real estate value of home A would be much higher than home B, they should be insured for the same amount.

While the information is nice to know, this thread is over 3 weeks old, and OP hasn't been back to respond to the information provided by other insurance experts, including myself.