I had a scenario presented to me that I would like to get feedback on. Is it permissible to require flood insurance for less than the insurable value and the loan amount? The property is located in a participating community.
Agricultural property was appraised for $1,780,000. The agricultural contributory value on the property is $480,000.
The Loan Officer has asked if he could back the coverage down to $150,000 with a $50,000 deductible. His reasoning is that in the event of a flood, the net $100,000 coverage for flood insurance would insure that our loan value remained at 70.35%. Property appraised $1,780,000 less arena value of $480,000 plus the $100,000 flood insurance value.