Amount of Insurance Required (originally posted in Audit moved here for relevance)
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.
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