I'm reading FEMA's Mandatory Purchase of Flood Insurance Guidelines and I've got some questions for the flood insurance gurus out there regarding condos.

If the condo association has a RCBAP, does that cover the flood insurance requirement? The Guidelines also discuss coverage of 80% of the replacement cost. Does this mean we need to determine the amount of replacement cost coverage in the policy? And if the coverage is only 80%, does the unit owner have to have a Dwelling Policy for the additional 20%?

I guess my bottom line question is what exactly do we need for flood coverage for a condo??

Just thinking out load...if you are talking about an individual unit, and not the entire building, would you need flood insurance?...wouldn't the flood insurance be the responsiblity of the people financing the entire building?

CW, as I understand it (and hopefully David or another Guru will chime in) as long as the association has the building insured to 80% of the replacement cost then FEMA will (through some sort of a co-insurance program) pay 100% of the partial loss. If they are insured below 80% then there is a co-insurance penalty assessed for any claims.

The coverage you need is the least of the O/S principal balance, the replacement value of the structure or the maximum allowed under the NFIP. If the associations insurance is enough to cover this you should be OK, but you need to insure the coverage is enough to cover the replacement value/O/S balance of your unit. The simplest way I know to do this is take the coverage and divide it by the number of units.

SWW, if you are taking a mortgage against an individual condo unit, I would hope there is no O/S loan to another FI on the building your condo unit is located in. But to answer your question, you as the lender on the condo unit are responsible to insure adequate flood insurance is in place if it is required.

The RCBAP is for coverage of the entire condominium. The 80% coverage is a FEMA requirement that was put in to induce the condo association to maintain reasonable coverage. If the coverage falls below 80% FEMA will impose coinsurance penalties in the event of a flood. If a potential borrower securing the loan with a condo unit (locted in a SFHA)can show the lender that the condo association has an RCBAP that meets the 80% requirement, that will meet the flood insurance requirements. If the coverage doesn't meet the 80% requirement the lender should require the borrower to obtain a separate insurance coverage from the NFIP.

Thank you Dan and Ken! It makes perfect sense!