Pennsylvania Halts Excess Home Insurance by Lenders

Pennsylvania homeowners may be entitled to a reduction in their homeowners’ insurance premiums, thanks to The Mortgage Property Insurance Coverage Act signed by Gov. Ed Rendell.

The law, which was spurred by the Insurance Agents & Brokers, prohibits mortgage lenders from requiring borrowers to insure their property in excess of the value of structures on the land. Previously in Pennsylvania, lenders often required home insurance on the full loan value. However, in the event of a loss, a policy would only restore the value of the structures.

For example, a homeowner with a $150,000 home on a $50,000 piece of land was often required to obtain a $200,000 homeowners’ insurance policy. Yet, if the home burned to the ground, the homeowner would be paid $150,000.

“This is a huge victory for consumers,” said Tom McElhaney, chairman of IA&B. “Homeowners are no longer forced to pay premiums on unnecessary coverage for which they will never be compensated.”

“Prior to passage of this law, agents have been in a frustrating position, stuck between a mortgage company’s demands and an insured’s actual needs,” said Rob Walbeck, vice chairman of IA&B. “Attempts at convincing the lender otherwise often fell on deaf ears, so the borrower felt compelled to comply with the lender’s demands.”

Several legislators spearheaded the legislation: Reps. Dan Frankel (D-Allegheny) and Mark Mustio (R-Allegheny) and Sen. Pat Browne (R-Lehigh), who sponsored corresponding bills in the House and Senate, and Senate Banking and Insurance Committee Chairman Don White (R-Indiana). It received unanimous support in the House and Senate.

Topics Excess Surplus Homeowners Pennsylvania