Limitations on Required Flood Insurance

(1) Limitations on Required Coverage. You cannot require in a mortgage, note, or otherwise, that a purchaser or owner of residential property purchase or pay for flood insurance on the property that: (a) is at a coverage amount exceeding the outstanding principal mortgage balance at the beginning of the year that the flood insurance policy shall be in effect and, in the case of a home equity line of credit, home equity loan, or second or subsequent mortgage, the full value of the credit line, outstanding principal on the equity loan, or second or subsequent mortgage on that property at the beginning of the year that the flood insurance policy shall be in effect; (b) includes coverage for contents; or (c) includes a deductible of less than $5,000. (2) Coverage Adjustment upon Policy Renewal. The owner of the residential property may request a reduction in the amount of flood insurance coverage upon renewal of the flood insurance policy to an amount equal to the outstanding principal mortgage balance at the beginning of the year that the policy shall be in effect. You are required to accept such reduction upon request by the owner.