I know in Florida, the law requires that Banks inform borrowers that the force placed policy “covers only our property interest which is the security for the loan or indebtedness, not your contents. The cost may be greater to you since we forced placed the policy. You may avoid any additional premium charges by purchasing an acceptable dual interest insurance policy within 30 days after this notice, then we will terminate the policy we purchased as of the effective date of the new dual interest policy and any unearned premium paid will be returned, plus interest.”

Does this kind of requirement also apply in Alabama?

I'm not sure about Alabama law (or Florida either for that manner) but since that is the way force placed flood insurance works under the Federal statutes, why would you not send such a notice?

I cannot seem to find the citation in the federal statutes where it talks about this.

Do you happen to have it?

A specific citation to make the disclosure - you won't find one but it is usually a standard part of any letter a bank sends to the customer when force placed insurance is put on their loan. If you look at Appendix 7 in the Mandatory Flood Insurance Purchase Guidelines, you will see that it is a required part of the notification letter under the MPPP program (Page 7-12). If you are using other methods to force place insurance, most banks with use notificaton letters based on this format.