New law frees Pennsylvania homeowners from unnecessary insurance requirements
Contact:
Karen Robison
(717) 795-9100, Ext. 606
HARRISBURG, Pa. – Gov. Rendell on July 4 signed into law The Mortgage Property Insurance Coverage Act. The legislation, which was spurred by the trade association Insurance Agents & Brokers of Pennsylvania, prohibits lenders from requiring borrowers to insure their property in excess of the value of the structures on the land.
“This legislation is a victory for consumers first and foremost,” said Tom McElhaney, chairman of IA&B. “It’s also a win for producers who were often placed in the middle of lender-insured disagreements.”
Prior to passage of this act, it was standard practice in Pennsylvania for lenders to require homeowners’ insurance on the full loan value, rather than the replacement cost of the structures on the property. However, in the event of a loss, a homeowners’ policy would only indemnify the owner for the value of the structure(s).
“A loan is a speculative business risk, which is not insurable,” said McElhaney. “In essence, policyholders were paying a premium on unnecessary coverage for which they would never be compensated.”
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.
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