Is anyone using the Flood Insurance Coverage Form in Bankers Tools? Here is my question. Why does the form have you state the total replacement cost per hazard insurance policy and then state in the 4th row the lesser of the values in the right column? If the customer isn't carrying enough hazard coverage and this is the lesser of the values, couldn't this make the form look accurate when it is not? I believe the flood coverage amount should be from row 1,2, or 4. I just wanted to verify this in the event that I am missing something. Thanks.

Just so everyone is on the same page, this is the Coverage Form you are referring to (I believe).

You are absolutely correct. Flood insurance must be purchased for the lesser of the appraised value, loan amount or maximum available. The amount of hazard insurance is not a consideration for the calculation.

I don't like how this is presented on the form either. However, when conducting audits of flood loans, I do like to look at the amount of hazard insurance. On several occasions I have seen the amount of hazard insurance in an amount greater than what the lender assigned for the appraised value for flood insurance. When questioning the loan officers about this, typically they admit that they were trying to get a low number for flood insurance. The borrower, knowing the value of the property, purchased a higher amount of hazard insurance. I then explain that if the value is $X for hazard insurance, then it must be $X for flood. You can't insure something for more than it is worth.

So, this is a good cross check, but you are right that it should be used as a calculation number to derive the least amount of flood insurance.

Thanks for the reply. I really started to question myself on the use of this form since I believe the customer is short on the amount of coverage but the examiners didn't state the calculation was wrong when the hazard insurance coverage amount (smallest number) was used instead of the correct three ways to calculate the insurance amount needed. I think I will modify the form for my use. The form is a great idea and I know the examiners liked it.