Calculation of coverage and payment of premiums.

(1) Any collateral protection insurance coverage, and the subsequent calculation of premium, should be based upon the replacement cost value of the property, which is determined as:

(a) If known to the lender or servicer, the last known coverage amount, which is the dwelling coverage amount set forth in the most recent evidence of insurance coverage provided by the mortgagee. The insurer shall inquire of the insured at least once as to the last known coverage amount. If the insurer is unable to obtain the last known coverage amount from the insured or in another manner, the insurer may proceed according to paragraph (b) or paragraph (c), as applicable.

(b) If the last known coverage amount is unknown, the replacement cost of the property serving as collateral, as calculated by the insurer, unless the use of replacement cost for this purpose is prohibited by other state or federal law.

(c) If the last known coverage amount is unknown and the replacement cost is not available or its use is prohibited by other state or federal law, the unpaid principal balance of the mortgage loan.

(2) In the event of a covered loss, any replacement cost coverage provided by an insurer in excess of the unpaid principal balance of the mortgage loan must be paid to the mortgagor.

(3) An insurer may not write collateral protection insurance for which the premium rate differs from that determined by the schedules of the insurer on file with the office as of the effective date of any such policy.