Thread Options
#2264728 - 01/13/22 04:32 PM Amount required on building and contents
rhospa Offline
New Poster
Joined: Mar 2016
Posts: 5
We have a loan secured by commercial property that is located in a SFHA. The loan is also secured by inventory. We have the required minimum of $500,000 in flood insurance on the building. Would we need an additional $500,000 (or value of the inventory, if lower) in flood insurance on the contents, or would we still just be required to have a total of $500,000 but split it between the building and the contents?

Return to Top
Flood Compliance
#2264731 - 01/13/22 04:45 PM Re: Amount required on building and contents rhospa
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,765
Bloomington, IN
What's the loan amount?

If your loan amount is $600,000 and the insurable value of the building is $750,000 and the insurable value of the contents is $375,000 then you need $600,000 in coverage.

Non-residential coverage for both the building and contents is $500,000 each under the NFIP.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#2270283 - 05/10/22 08:07 PM Re: Amount required on building and contents rhospa
BA13 Offline
100 Club
Joined: Jul 2016
Posts: 179
To make sure I understand the non residential w/contents coverage, if the lessor of is the maximum under the NFIP $500,000 building + $500,000 contents, can the borrower allocate $800,000 to the building and $200,000 for contents?

Return to Top
#2270289 - 05/10/22 08:45 PM Re: Amount required on building and contents rhospa
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,293
Galveston, TX
No - the maximum per building is $500,000. How can you allocate $800,000 to the building?
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2270293 - 05/10/22 09:52 PM Re: Amount required on building and contents rhospa
BA13 Offline
100 Club
Joined: Jul 2016
Posts: 179
I'm sorry, my other pertinent information isn't above and I thought it was, wow! For an example of total insurable value for the building and contents = $1.9M, loan at $1.6M so that leaves the $1M maximum, correct? Coverage can be allocated between the two to meet the lessor of requirement.

Return to Top
#2270294 - 05/10/22 09:56 PM Re: Amount required on building and contents rhospa
rlcarey Online
10K Club
rlcarey
Joined: Jul 2001
Posts: 79,293
Galveston, TX
For an example of total insurable value for the building and contents = $1.9M

You cannot combine the insurable values. You have to know what the insurable value is for the building and what the insurable value is for the contents. You cannot insure contents for $500,000 if the content's insurable value is $200,000 and the building's insurable value is $1.7MM.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2270570 - 05/18/22 12:49 PM Re: Amount required on building and contents rhospa
RVFlyboy Offline
Power Poster
RVFlyboy
Joined: Oct 2000
Posts: 5,978
Soaring over Georgia
Just to be clear, $500,000 is the maximum available under the NFIP for the building. If the building has an insurable value of $1.7M and the contents $200K, flood regs would require you to have $700K in insurance - $500K for building and $200K for contents. For your $1.6M loan, you may want to require an additional $900K in private flood insurance on the building. That's a credit risk exposure you need to address.
_________________________
Jim Bedsole, CRCM, CBA, CFSA, CAFP
My posts - my opinions

Return to Top
#2270727 - 05/20/22 05:56 PM Re: Amount required on building and contents rhospa
BA13 Offline
100 Club
Joined: Jul 2016
Posts: 179
Thank you both for the help. We received additional information for the insurable value of the contents to determine that coverage (is less than the max $500,000) and will require additional private coverage on the building for risk exposure.

Return to Top