Amount of Insurance Required

Looking for some input

We have a commercial loan secured by real estate with a block building located on a portion of the land. Total value is estimated at $180,000 (building, improvements, and land) the total estimated value of the land is $150,000. The outstanding balance of the note is approximately $125,000. Based on the standards set in the FPA my understanding is that the amount of flood insurance required should currently be the total estimated value of $180,000 less the value of land $150,000 for an insurable amount of approx. $30,000.

Now for the question... Located in the appraisal is a value of the building located on the real estate for approx. $12,000. The bank appears to be using this amount assigned in the appraisal for the minimum amount of flood insurance required. Is this acceptable, because based on my interpretation I'm not sure that this is an allowable determination for minimum insurance required?

All feedback is appreciated.

In this case, as the value of the building is going to be the lesser of the three amounts that you normally look for, you are going to have to determine the insurable value of the building.

The insurable value of the building has nothing to do with the appraised market value.

If there is a cost approach in the appraisal, look for the depreciated value of the structure as commercial buildings can only be insured up the actual cost value and not replacement cost value.

I will not be making a habit of posting the same question everywhere on the site. I was only trying to ensure I got it into the correct section. Sorry for any inconveniences this has caused.

It happens when you first get here! You are auditing so you naturally come to the "audit" area, and then you realize that there's a whole flood area! But eventually you get to know where to post for the best responses.