We have a loan secured by a building located in a SFHA along with the contents of the building. The building is valued at $ 450,000.00 and the contents at $528,000.00. The current loan balance is $ 467,000.00.
The borrower has provided a flood insurance policy showing $ 250,000.00 of flood insurance on the building and
$ 250,000.00 of flood insurance on the contents.
Is this adequate insurance to meet the flood insurance regulations?

If you are happy with that from a safety and soundness standpoint, you are good from a regulatory standpoint.

If this is not a 1-4 Fam, wouldn't the required coverage be expected around $500,000?

TickTock, their loan balance is $467,000. They have $500,000 in coverage between the building and the contents. They meet the minimum coverage requirement. See Q&A #39.

Here is a situation that we are struggling with.

Commercial property (hotel) & contents secure the loan:
Loan Balance = $1,300,000
Insurable Value = $1,600,000 (bldg.) & $390,000 (contents)
Insurance Available = $1,000,000 ($500,000 for commercial bldg. + $500,000 for commercial contents).

So, the lesser of the three is the $1,000,000 insurance available.

Our struggle: The maximum insurance available for the building is $500,000. Our first inclination is to then require $500,000 in coverage on the contents. How can we require this if the value of the contents is only $390,000? If we only require $1,390,000 in total flood insurance coverage, though, we aren't meeting the $1,000,000, which was determined to be the lessor of the loan balance, insurable value or insurance available.

What do we do?

Under the NFIP your minimum coverage requirement is $890,000.


$500,000 max on the building and $390,000 insurable value of the contents.

The minimum coverage under the NFIP is the lesser of:

The insurable value of the property;
The outstanding balance of the loan, or
The maximum available through the NFIP for the property type.

Thank you! It makes perfect sense when you calculate the required coverages separately. I think we were making it more complicated than it needed to be.

I think we are ok but could someone confirm for me?

*We have a commercial loan with a balance of $325,000.
*Secured by a building with a RCV of $300,000 and equipment with a RCV of $200,000.
*We have flood insurance in place for the building at $200,000 and $125,000 on equipment.

Based on your figures you have the minimum coverage in place.

Just keep in mind for commercial buildings the insurable value is the ACV and not the RCV.

Ahh..good catch, Dan! I was more looking at it from the angle of was it acceptable to mix and match the flood insurance on the building and equipment to meet the lowest of the loan balance, maximum for the program or insurable value.

Thanks for confirming our insurance is adequate and also reminding me of the ACV for commercial buildings!