Commercial loan with a property in a flood zone. Securing contents in the amount of $1MM.
There are three structured in the flood zone.
Want to ensure that we obtain enough contents coverage. For non RE property, the max contents would be $500,000. Is this per structure or is it per loan?
In other words, if my contents is $1MM (loan amount)
3 structured at max would be $1.5MM contents coverage ($500,000 each)
or $500,000 max for the loan total?

Each structure has to have its own flood policy, does each policy have to have contents coverage, or can all of the contents coverage be on one of the policies?

$500,000 per policy of content coverage. You need to determine the location of the contents and the value in each building to figure this out. Also, if your loan amount is $1M and you have $1M in building coverage, you only need a minimal amount of content coverage. While the building and contents need to be covered, you only need a total coverage of $1M. This is assuming that the buildings are also securing this loan and it is not contents only.

I think I understand what you are saying, but let me give you some actual numbers
Maximum on 3 non residential structures - $1,500,000
Structure 1 = ACV of $560,000
Structure 2 = ACV of $240,000
Structure 3 = ACV of $160,000
Total is $960,000
Loan Amount is $1,700,000
Contents securing the loan valued to $260,000

In this case we would want to have coverage totaling $960,000 utilizing 3 different policies for the three separate structures. The contents coverage would have to total $260,000. Should that be on one policy, or should that be spread out over the three policies?

Loan amount = 1,700,000;
NFIP Max = 1,500,000 (3 x 500,000) PLUS 260,000 (contents can be insured for $500,000 additional) = 1,760,000;
Insurable Value = 960,000 + 260,000 = 1,120,000

Therefore, you need to have total insurance of the "lesser of 3" or $1,120,000.
As you know, you'll put $500,000 on each non-residential structure. Each non-residential policy will have a contents rider. If all of the $260,000 was in one building, you would put it on that one policy. If the contents are located in all 3 buildings, you'll need to divide it up. If this is the case, you'll need to find out what value of contents is located in each building and allocate it among each building policy.

Good luck.

We would have to put the max NFIP on each non-residential structure? The lowest of the three are the insurable values which are less than that.

Structure 1 = ACV of $560,000 = $500,000 in building coverage
Structure 2 = ACV of $240,000 = $240,000 in building coverage
Structure 3 = ACV of $160,000 = $160,000 in building coverage

Total is $900,000

You should not insure the individual buildings for more than their insurable value.

Plus $260,000 in content coverage based on which buildings the contents are located.

I'm sorry. I incorrectly typed my last response. I meant to say, you'll max out the first building because it's insurable value is more than $500,000 (the max under the NFIP).

Randy itemized it well. Sorry for the confusion.

Got it!
Thank you again for the clarifications.

Randy....when it comes to the contents coverage....do you insure for RCV or ACV of the contents?

Contents is always ACV.

Thanks!

I am curious.

How do you determine the ACV of the contents?

Well, my point of view is - if you do not know the value of your collateral - why even take it? If you don't know the value and you don't need it to make the loan, if you don't take it, it solves all of your problems. If you do take it, then that is what you need to figure out. Since that collateral could consist of a wide variety of items, there is no way to give you any specific advice beside getting it appraised or hire out an evaluation or go by other insurance amounts..