October 25, 2005
FLOOD INSURANCE - DISCLOSURE REQUIREMENTS
By: Janet L. Kaminski, Associate Legislative Attorney
You asked if (1) there have been any state legislative proposals requiring mortgage companies and insurance companies to disclose information explaining or supporting the need for flood insurance and the associated costs and (2) such legislation could be proposed.
A search of bills proposed from 1988 to the present revealed no such legislative proposals. A proposal on a related topic, which became Public Act 00-95, prohibits mortgage lenders from requiring prospective buyers of residential real estate to purchase insurance, including flood insurance, for amounts in excess of the premises' replacement value as a condition of granting a mortgage.
A legislator could propose a bill that requires a mortgage company to disclose details relating to the need for flood insurance and associated costs. Typically, mortgage companies require a prospective homebuyer to purchase flood insurance if the real estate is located in a flood zone, as determined by the Federal Emergency Management Agency (FEMA). Flood insurance is not provided by the private insurance industry, but through the National Flood Insurance Program (44 CFR § 59 et seq.).
For more information about the National Flood Insurance Program, see OLR Report 2004-R-0400 (attached).