Amidst the growing concerns over escalating property-insurance rates in Florida, two Republican legislators have put forth a proposal aimed at providing homeowners with the option to purchase insurance policies specifically covering unpaid mortgage-loan amounts.
Senator Ileana Garcia, representing Miami, introduced the proposal (SB 1070) in the Senate on Wednesday, closely followed by Representative Alina Garcia, also from Miami, who filed an identical House version (HB 809) earlier this month.
The core objective of this proposal is to potentially alleviate the financial burden on homeowners by offering policies tailored to cover only the outstanding balances on mortgage loans. The anticipation is that these mortgage loan-based policies would be more cost-effective compared to comprehensive home insurance coverage.
While the proposal holds the promise of reduced insurance premiums, it introduces a significant trade-off for homeowners. Opting for mortgage loan-based policies would mean shouldering greater financial risks, as these policies would not provide as much coverage for repairing or replacing homes damaged due to unforeseen events.
Under the proposed legislation, insurers would be obligated to issue a notice to individuals opting for mortgage loan-based policies. This notice would explicitly convey the potential drawbacks, stating that in the event of a total loss or a situation where the repair costs exceed the unpaid balance of the mortgage loan, homeowners could face substantial financial losses, including the potential erosion of their home equity.
It is essential to note that lenders mandate homeowners to maintain insurance coverage if they have outstanding mortgages. The proposal is now slated for consideration during the upcoming legislative session, scheduled to commence on January 9.
