Many homeowners pay higher premiums than neccesary for their property Hazard insurance or what is commonly referred to as homeowners insurance. Did you know that Maryland law states that it is against the law to for a lender as a condition of the loan to require a borrower to carry insurance for more than the replacement value of the home.

I have often seen instances where the lender, as a condition of the loan require the borrower to insure the property for a minimum of what the loan amount is. This is a clear violation of the law and whenever challenged the lender allways backs down.

You may not think of it as a big deal but when you consider a savings of even $15 dollars a month, compounded over 30 years it can really add up.  

The vast majority of my business as a loan officer is based in Maryland, as such I'm not familier with the laws ion othe r states. I would imagine though there are simular laws on the books in each state of the union. 

I urge everyone who reads this to check their insurance policy to make sure you are not paying more than you need to. Below is a copy of Maryland insurance law.

Maryland Law against over insuring property

Artical - Commercial Law    §12–124.

(a)    (1)    (i) In this section the following words have the meanings indicated.

(ii) "Flood insurance coverage" means flood insurance against losses caused by flooding that are covered under a policy issued by:

1. The Federal Government; or

2. An insurer.

(iii)    "Improvements" means buildings or structurs erected upon or affixed to real property that enhance the value of the real property.

(iv)    "Property insurance coverage" means property insurance against losses caused by perils that commonly are covered in insurance policies described with terms similar to "standard fire" or "standard fire with extended coverage".

(v) 1. "Replacement cost" means the amount needed to repair damage to or rebuild improvements on real property to restore the improvments to their pre-loss condition.

2. "Replacement cost" does not include the value of land. 

(2)  A lender may not require a borrower, as a condition to receiving or maintaining a loan secured by a first mortgage or first deed of trust, to provide or purchase property insurance coverage against risks to any improvements on any real property in an amount exceeding the replacement cost of the improvements on the real property.

(3) A lender may not require a borrower, as a condition to receiving or maintaining a loan secured by a first mortgage or first deed of trust, to provide or purchase flood insurance coverage in an amount exceeding the replacement cost of the improvements on the real property.

(4) In determining the replacement cost of the improvements on any real property, the lender may:

(i) Accept the value placed on the improvements by the insurer; or

(ii) Use the value placed on the improvements by the lender's appraisal of the improvements.

(5) A lender may not require that the insurance be purchased through a particular insurance producer or insurance company.

(b) (1) A violation of this section shall entitle the borrower to:

(i) Seek an injunction to prohibit the lender who has engaged or is engaging in the violation from continuing or engaging in the violation;

(ii) Reasonable attorney's fees; and

(iii) Damages directly resulting from the violation.

(2) A violation of this section does not affect the validity of the first mortgage or first deed of trust securing the loan.