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Flood Insurance Coverage
Question: What can we do to determine whether a flood insurance policy owned by the condo association is sufficient to cover the unit we are financing?
Answer: There is no mandated method to determine whether the policy is sufficient. What you should consider is the value of the unit and the value of the building or complex relative to the amount of coverage the association maintains. Obviously, the best method is for the condo association to provide you with the unit value information together with a showing of flood hazard coverage.
Failing that, there are several other ways to do this. One is to determine the value of the entire complex and divide by the number of units and compare this to the policy. Another is to apply the appraised value of the unit you are financing to the master policy to determine whether coverage is adequate. No matter what, you should study the terms and conditions of the association's policy to be sure that all required elements of coverage are included.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 6, 6/04
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