Skip to content
Thread Options
#1845114 - 08/22/13 08:22 PM Definition of Overinsurance?
YosemiteSamIAm Offline
Power Poster
Joined: Jan 2004
Posts: 2,795
What do the FEMA FAQs mean when they warn against creating an "overinsurance" situation for the customer when using hazard insurance RCV to set your required flood insruance amunt? Does "overinsurance" mean, for example, requiring $200,000 from the hazard insurance policy when the loan amount on a refi is only $100,000 and that is the lesser of amount? Or does it mean that if the hazard policy is for $200,000 on a house that appraises for only $100,000, that requiring $200,000 in flood coverage is "overinsuring".

Additionally, does anyone feel that it is ever acceptable to use the RCV from hazard policies when you have a cost approach in the appraisal? And, if you do use hazard RCV, what do you do about getting a value for the foundation RCV and do insurance agents generally laugh or refuse to provide that inforamtion. We have investors that require hazard RCV and I think that exposes us to a potential flood violation.
Sorry, did I just use my outside voice?

Return to Top
Flood Compliance
#1845165 - 08/22/13 10:32 PM Re: Definition of Overinsurance? YosemiteSamIAm
rlcarey Online
10K Club
Joined: Jul 2001
Posts: 79,912
Galveston, TX
I don't think that you are going to find a solid definition of over insurance, but it basically means that you are not knowingly requiring the borrower to obtain more insurance than what they could possibly submit a claim for. For example, you don't want to force RCV on buildings that are only eligible for ACV coverage when there is acknowledged depreciation of the building involved. Similarly, a blanket requirement of flood and other insurance being of the same amount without an analysis of the differences in coverage is also probably a dangerous practice.
The opinions expressed here should not be construed to be those of my employer:

Return to Top