We have a loan that is in a flood zone secured by commercial property on some acreage. What is the best method of determining the amount of flood insurance needed when we have a cost approach method in the appraisal, an income approach method in the appraisal, or the replacement cost in the hazard insurance policy. All have varying amounts and of course everyone has a varying opinion on the amount of insurance needed.

A flood policy on a commercial property will only pay up to the actual cash value of the building on a loss. Your cost approach analysis in your appraisal should give you what you need.