How much flood coverage on a loan like this? The loan has two properties, one in a flood zone, one not - each property individually is worth more than the loan amount, the one in the flood zone taken as abundance of caution. We realize the FEMA insurance guidelines state flood insurance is required and that the insurable value of the building and improvements govern insurance amount and that coverage should be the lesser of the loan principal or maximum coverage. The loan is around $95,000, deduct for value of land and that's what the coverage should be (and contents coverage - it's commercial property)? Thanks!

First, forget the "abundance of caution" issue.
Second, forget the building not in the flood zone.
If the value of the building in the flood zone is more than $95,000, then you need $95,000 in flood insurance.

Thanks! I do realize abundance of caution is irrelevant, flood insurance is required, even with the other property. One more clarification - the value of the land should not be deducted from the coverage requirement? I'm taking this from page 25 in the FEMA Insurance Guidelines where it discusses "low-value building on high-value land". This situation is not exactly the same, but we do have other property and land that is high-value compared to the building.

What you do is take an appraisal and deduct the value of the land out of the number. What is left is the value of the building. The building is what is insured. If the land value is high the insurance required is low.

Quote:

---

the value of the land should not be deducted from the coverage requirement?

---

This is incorrect. The value of land should be deducted.

From page 25 on Low-Value Building on High-Value Land:

The value of the land should be deducted from the overall value of the secured property when calculating the required limits.

When dealing with multiple buildings you only deal with the building(s) located in the SFHA.

If the building located in the SFHA has a value of $80,000 and your loan balance is $95,000 then you need $80,000 in coverage. If the building located in the SFHA has a value of $110,000 and your loan balance is $95,000 then you need $95,000 in coverage.

Thanks all! I appreciate your responses!

Dan's correct. You didn't give us any specifics other than that the appraised value was more than the loan amount, so I didn't know how to give you an exact amount.