"My lender wants my homeowners policy to cover the home AND the land value. Can they do that?"

No, not in Washington state.

Since the land itself is not considered covered property, including it would inflate the cost of your insurance premium. And you could never collect on a claim for the value of that land, since it's not covered property.

To preclude such a waste of your premium dollars, Washington state law bans insurers from issuing a policy that includes the value of non-covered land. The title of the relevant section of law says it all: "Over-insurance prohibited."

That said, however, you can get a policy for what's called "replacement cost" coverage for your home. With that kind of coverage, you could collect the cost to replace the home in the event that it was totally destroyed by a covered event and had to be rebuilt. And that replacement cost can be more than a home's current market value, particularly if the home is older or in less-than-sterling condition.

Questions? The law we're referring to is RCW 48.27.