Homeowners in flood zones are likely to find it easier to afford rising insurance rates with a new law recently signed by Governor Deval Patrick. The law, which goes into effect in 120 days, will allow homeowners to purchase flood insurance just on the outstanding balance on their mortgage.

Previously, creditors could require homeowners to buy flood insurance up to the value of the property. Homeowners won’t also be forced to purchase flood insurance that covers the contents of their home. Policies will also be barred from having deductibles less than 5,000 dollars, which is also meant to lower the cost of premiums.

Attorney General Martha Coakley, who filed the legislation with House Speaker Robert DeLeo, said the new rule will lower premiums for homeowners within flood zones drawn by the Federal Emergency Management Agency. “The proposed federal flood insurance changes were inherently unfair to thousands of Massachusetts families,” Coakley said in a statement. “This new law, combined with recent changes to the National Flood Insurance Program, will offer greater protection to families who could face unsustainable rate increases through no fault of their own.”

FEMA recently released new flood zone maps which led to massive hikes in some homeowners insurance premiums, including those who had never been in a flood zone before. Coakley was highly critical of the maps, saying they could set off a new wave of foreclosures as homeowners struggled to cope with the sudden spike in costs.

A recent NECIR investigation showed that FEMA’s flood insurance program is billions in debt, in part because of long-standing subsidies and multiple payouts for the same properties. Those losses could increase: Sea levels are rising worldwide, and Atlantic waters from north of Boston to Cape Hatteras, North Carolina are rising at a rate three to four times faster than globally, according to federal scientists.

Billions of dollars worth of homes are at risk for flooding.

With the new law, banks will be required to send notice to homeowners explaining what the required flood insurance does and does not protect. Homeowners will also have the option to purchase more expansive policies. But Senator Dan Wolf, who represents the Cape and Islands, says he’s very concerned about how the new law covers the mortgage holder and the bank and “leaves the homeowner completely naked.”

In the case of a flood, homeowners with the minimum required insurance won’t get any compensation for their damaged or lost property. Wolf says for many low and middle income people, their home represents their largest investment. “It just doesn’t seem responsible,” he said.

He acknowledged that insurance rates for many of his constituents were about to spike to dangerous levels. But, he said, it is not a long-term fix. “The real fix,” he said, “is to figure out how to make the insurance premiums affordable.” In March, President Obama signed the Homeowner Flood Insurance Affordability Act, which limits rate increases to 18% per year and calls on FEMA to limit premiums to 1% of total coverage of each policy. 

The federal legislation also tries to slows the rate of premium increases. Rachel Cleetus studies sea level rise and coastal flood insurance rates at the Union of Concerned Scientists in Cambridge, where she’s the senior climate economist. She said she understands the impetus behind the bill, but considers it a short-term solution.

“It’s a risky strategy,” she said. “It’s a gamble that you won’t get flooded.” According to Cleetus, the balance between protecting property and people in coastal areas and keeping the costs down is a difficult one to strike. She hopes the conversation won’t end with the newly signed bill.

She’d like to see coastal communities start to think about how to flood-proof their towns, along with other reforms to keep up with the rising risk of floods. “This is just a new reality we have to face up to--sea level rise is happening. Legislators can’t legislate it away,” she said.