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#3089 - 07/19/01 09:12 PM Calculating Flood Insurance Coverage
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
I'm reviewing a file where the borrower has flood insurance on the building in the amount of $50,000. The loan balance is $87,000. The appraised value is $85,000 and the liquidated value is $68,000. I'm not sure how much the land is worth, but I'm wondering if there is enough flood insurance coverage on this property? I've read one source that said the amount of coverage should cover the loan amount or the maximum amount permitted under the NFIP, whichever is less, but the FEMA guidelines state that flood insurance coverage under the NFIP is limited to the overall value of the building. Thank you.

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General Discussion
#3090 - 07/19/01 09:47 PM Re: Calculating Flood Insurance Coverage
David Dickinson Offline
10K Club
David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
You are correct that flood insurance coverage should cover the loan amount or the maximum amount permitted under the NFIP, whichever is less. The maximum amount can be broken down into two values: the value of the improved real estate (you cannot insure something for more than it is worth) and the NFIP limitations(250,000 for residences and 500,000 for commercial properties).

You should try to find out what the land value of the property is and get insurance equal to $85,000 minus the land.

_________________________
David Dickinson
http://www.bankerscompliance.com

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#3091 - 07/21/01 11:02 PM Re: Calculating Flood Insurance Coverage
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
What would be the requirement for a large commercial project (i.e. a shopping center $1-2 million)? If the maximum the borrower could get under the NFIP on non-residential is $500,000, can the borrower get supplemental insurance coverage through another source?

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