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#2043300 - 10/08/15 03:00 PM Brain Lock - Flood
mdog76 Offline
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Posts: 645
Does flood insurance cover the property of structure? Customer has max coverage of $500,000 on the main structure, but the loan officer just found out there is a small outbuilding on the property as well. Would the small building be covered or need its own coverage?

With TRID, my brain isn't functioning on Flood right now ha!

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Flood Compliance
#2043320 - 10/08/15 03:28 PM Re: Brain Lock - Flood mdog76
MyBrainHurts Offline
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Joined: Feb 2010
Posts: 960
Illinois
Each structure needs to have its own policy. The outbuilding will not be covered under the policy for the main structure.
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#2043322 - 10/08/15 03:34 PM Re: Brain Lock - Flood mdog76
mdog76 Offline
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That's what I couldn't remember. The loan officer said the appraisal didn't have a value for the small outbuilding.

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#2043346 - 10/08/15 04:42 PM Re: Brain Lock - Flood mdog76
mdog76 Offline
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Posts: 645
So here is the question:

Buliding is worth $20,000 per hazard policy.

Loan officer wants $5,000 coverage with $15,000 deductible.
I know this is not acceptable.

Would $20,000 coverage with $10,000 deductible be acceptable?

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#2043351 - 10/08/15 04:56 PM Re: Brain Lock - Flood mdog76
mdog76 Offline
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The officer has seen his mistake, just took convincing he was wrong ha!

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#2043353 - 10/08/15 04:57 PM Re: Brain Lock - Flood mdog76
David Dickinson Offline
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David Dickinson
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Posts: 18,762
Central City, NE
First, you'll need to determine the value of the building. $20,000 may be right, but that's the hazard insurance policy. Flood can be different.

If $20,000 is the value, you have to have $20,000 in coverage (not $5,000). This assumes the loan amount is more than $520,000 (combined value of main and outbuilding). You can have a deductible of $15,000. Deductibles are up to the lenders but need to meet prudent standards (can the borrower afford it? etc.).
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#2043362 - 10/08/15 05:10 PM Re: Brain Lock - Flood mdog76
mdog76 Offline
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The loan amount is well above $520,000 and this customer can afford the $15,000 deductible.

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#2043372 - 10/08/15 05:50 PM Re: Brain Lock - Flood mdog76
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,935
Idaho
I doubt this is the case in this scenario, but I'll ask anyways.

If the main structure is an apartment building (5+ units), the max insurance under NFIP is now $500,000. If the detached structure is non-residential, would it fall under the exemption for detached structures on residential properties?
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#2043393 - 10/08/15 06:31 PM Re: Brain Lock - Flood mdog76
mdog76 Offline
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Posts: 645
Ok, I am going to have to call the insurance company but they are telling my loan officer that if we have a policy worth $20,000 with a $15,000 deductible, the customer has $35,000 in coverage and that $5,000 coverage with a $15,000 deductible would equal $20,000.

At no time have I ever heard that the deductible amount gets figured in the amount of coverage you have on a structure. Has anyone else heard this before?

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#2043395 - 10/08/15 06:36 PM Re: Brain Lock - Flood mdog76
TMatt87 Offline
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TMatt87
Joined: May 2011
Posts: 1,935
Idaho
Most insurance agents know less than nothing about flood insurance.
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#2043456 - 10/08/15 08:33 PM Re: Brain Lock - Flood mdog76
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,958
Bloomington, IN
Ok, I am going to have to call the insurance company but they are telling my loan officer that if we have a policy worth $20,000 with a $15,000 deductible, the customer has $35,000 in coverage and that $5,000 coverage with a $15,000 deductible would equal $20,000.

Just have your borrower get a $20,000 policy with a $15,000 deductible. Don't waste your time with this agent.
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#2043545 - 10/09/15 01:35 PM Re: Brain Lock - Flood mdog76
mdog76 Offline
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Joined: Jan 2007
Posts: 645
We got what we had to have and is correct. It was a fun experience though!

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