I am told by several compliance knowledgeable people that in a recent Flood seminar, a FEMA representaive stated that ACV (Actual Cash Value) rather than RCV (Replacement Cost Value) is to be used for vacation or rental homes as the insurable value. Where can I find this written? The Commentary and Final Question 9 of the Flood Q&As talks about ACVs being applied to non-residential buildings, and some flexability in determining RCV such as the cost approach on the appraial, the RCV used of the hazard insurance (factoring cost of foundation)or construction cost calculation, but I could not find anything that talked about ACVs for non-owner occupied 1-4 residential structures.

Flood insurance only pays on RCV values on owner-occupied residential properties. All others are based on ACV.

Page 28 of the Mandatory Purchase guidelines.

In order for a residential dwelling policy to pay RCV, certain conditions must be met. First, the dwelling must be the policy owner’s primary dwelling. The problem with this is that NFIP does not define primary dwelling the same as other compliance regulations. The NFIP states that the policy owner must live in the dwelling at least 80% of the last 365 days. This causes problems for customers who split time between summer and winter homes. Second, the primary dwelling must be “fully insured” (meaning the industry standard of at least 80% insurance to value). Problems arise when the RCV changes (for example, construction loans). At the time of closing, the property may be insured at 80% insurance to value but due to higher building costs, the RCV could increase. If the dwelling form policy is not increased, the insurance may fall below 80% insurance to value at the time of the flood loss. Third, the dwelling must be a single unit. If any of these three conditions are not met, the dwelling policy will only pay the borrower ACV, which means the borrower will receive a check for less than their policy coverage amount at the time of loss. The information requested can also be found in the "Policy" section of the FEMA Flood Insurance (Agent's) Manual. www.fema.gov/business/nfip/manual201105.shtm

Thank you for the good comments and explanations.

So if a property has a residence that isn't in a flood zone and a boat house on the same parcel that is in a flood zone (boat house is not occupied by the owners, mainly used as "mancave") then the boat house would need ACV coverage, right?

Regarding depreciation and ACV. So, if we determine that we need ACV and we must now calculate depreciation - how do we do that exactly? And if we are supposed to factor foundation coverage, how do we do that?

And Raiders - If the boathouse is not a residence (and not commercially being used), then the latest rulemaking exempts it from flood insurance requirement.

Thanks for your input - I know this stuff is frustrating to read let alone give out advice on.

The boathouse has residential features (bedrooms, bathroom, kitchen) but isn't being used as a residence. From opinions that I've received and reading the guidance, flood insurance would be needed for this structure. I just wanted to make sure that ACV is right and not RCV.

RCV is only available when the building is the principal residence of the insured.

Thanks, Randy!

Is vacation/rental property (single family home) still limited to $250,000 coverage?

It's a 1-4 family dwelling, so $250,000 is the max from the NFIP.