Commercial loans secured by a warehouse. 1st loan was made a year ago for $495,000. That time, we took a blanket UCC, but didn't require contents coverage. Couple of months ago, we did the second loan for $100,000.

ACV- $808,536
Loan amount - $595,000 (both)
Max NFIP - $500,000

Now, our policy is for $500,000 with no content coverage. From my reading, it looks like we have to have content coverage and I would like to see if I could change the building coverage from $500,000 to $392,000 and add $108,000 content coverage to correct the policy coverage?

Or do I have to keep $500,000 for the building coverage and require extra $108,000 coverage on the contents on top of it?

Thank you,

So the building and contents secure both loans? Then you need a combination of building and content coverage equal to your loan amount.

Loan officer didn't take any contents as security for the second loan. But our first loan has a blanket UCC, to be truthful, I am not sure if that makes any difference.

So Randy, you think I need a combination of building and contents coverage equal to the loan amount, not the the NFIP max?

$500,000 on the buildings and 95,000 on the contents? Is that because we treat them independently and both building and contents have their $500,000 limit under NFIP?

If loan one $495,000 was secured by both contents and building, then you needed a combination of building and contents equal to $495,000 in any combination.

If the second loan is only secured by the building, then you only need additional building coverage for that loan.

A single loan has to be secured by both the building and contents for content coverage requirements to come into play.

Make sure the two loans are not cross-collateralized.

Okay. Thank you

Sorry. One more question. If we did this correctly in the first place, let's say $450,000 on the building and $45,000 on the contents, when we did the second loan that was building only secured for $100,000, do I require $500,000 under NFIP or $550,000 for the building for both loans?

You can only have $500,000 on any one building.

Okay. That's what I thought but wanted to double check. Thank you.