I apologize in advance for my confustion!!!

Loan amount: $290,096
Collateral: Non-residential building 1 and non-residential building 2 located at same address with combined appraised value of $510,000
Land value from tax assessment: $393,350
Total value of improvements: $510,000-393,350= $116,650
Hazard insurance replacement cost: $413,700 combined
Maximum NFIP available: $1,000,000 (2 buildings)

The customer purchased a policy for $300,000 in coverage which satifies the minimum requirement of $116,650, but it is only on building 1. Even thouth the policy amount is more than our loan amount, aren't we still required to have some coverage on each building because there are two separate structures?

Yes, you are required to have a separate policy on each building. It is also usually easier to confirm that you have the appropriate amount of coverage if you look at the value of each building separately. You do not want to require that either building is over-insured.

Thanks!

combined appraised value of $510,000
Land value from tax assessment: $393,350

You are using apples and oranges here - if you are using the cost approach from the appraisal, why are you using tax assessments for land value.

If you are starting with the market value from the appraisal - that is the wrong figure to start with.

Thank you for pointing that out!
I understand that the flood insurance should be the lowest of: the loan amount, maximum coverage from FEMA, or replacement cost. The bank has a coverage worksheet that they complete that includes four amounts--1. total of loans on property 2. total value of improvements (which is described as total appraised value less land value)3. total replacement cost per hazard insurance policy and 4. maximum NFIP available.
In this example, the appraisal actually does not have a cost approach. The $510,000 is the market value. I would also point out that the tax assessed total value is $588,850 where $393,350 is land and $195,500 is property improvements.
The replacement cost in this example would be $459,500 based on hazard insurance policies. In a situation like this where you actually have a figure for the value of improvements and the replacement cost on the hazard insurance, I am confused as to which you would use. Is it a bank policy/procedure decision at this point?

The most reliable from what you have listed, to me, would be the hazard insurance...this is a common reference material for RCV...may not be as reliable for ACV.

The more I think about the flood coverage form currently used, I can't really imagine an instance where it would be a sound practice to base coverage on a tax assessed value.
The lender may have a better argument if basing it on an appraiser's cost value (provided it is given in the appraisal, unlike the one in my original example).
I am considering making a recommendation that the RCV based on hazard insurance is used in lieu of the "total value of improvements" section of the form.
Please correct me if I am wrong here and missing an obvious point.

multiple policies? Question comes to mind then. If we have a property that has a house, a poll barn, and a shed that require flood insurance are you saying we need three separate flood policies?

A loan secured by a house, pole barn (if defined as a building) and shed each located within a special flood hazard area would require three separate flood insurance policies.

Say you have a loan secured by a property with a house, pole barn and shed all located within a SFHA and the shed has an ACV of $500... do you require your customer to get a separate policy for the shed?

The minimum deductible is $2,000 - it can't be insured. Just make sure that value is well documented.

Thank you for the reply!