Question about Katrina survivors and debt

[KayLaw]

I'm trying to figure out what will happen to the people whose homes were demolished. Here is my specific question: Do the companies who give cash-out refinancing and/or home equity loans make the homeowners buy more insurance?

If someone counted on selling his or her house based on what their neighbor got last month and used that to justify a home equity loan what would happen should their home be trashed?

Our house (here in Florida) is insured for ($145,000), assessed by the property assessor at $208,000, but a neighbor just sold a similar house for over $300,000. We paid far less than any of those numbers and owe less than $100,000, so I know what would happen to us, but what if we accepted one of the many offers we get on a daily basis to cash out huge sums of equity?

[SW FL Dem]

1. I think most lenders want evidence of insurance

but not necessarily for the full value of the house (based on the replacement cost of the house, not including the land it sits on.) Our house is currently valued at over 700K but insured for less than 300K (our mortgage is under 250K). Most of our value is the dirt because of our location.

[ohio_liberal]

2. Not in my experience

I know people who had insurance, some who had none during flooding-related disaster. Some of them had insurance that paid for all of the repairs and some who got SBA low-interest loans. No one that I know of was required to purchase *more* insurance. Some of them did end up buying flood insurance, even though we're not technically on a flood plain, to cover any damage that might be done in the future.

It's up to an individual homeowner to make sure you're adequately insured. My insurance agent told me to contact her right away should we make any significant improvements to our home to make sure we're adequately insured.