Brain Lock - Flood

Does flood insurance cover the property of structure? Customer has max coverage of $500,000 on the main structure, but the loan officer just found out there is a small outbuilding on the property as well. Would the small building be covered or need its own coverage?

With TRID, my brain isn't functioning on Flood right now ha!

Each structure needs to have its own policy. The outbuilding will not be covered under the policy for the main structure.

That's what I couldn't remember. The loan officer said the appraisal didn't have a value for the small outbuilding.

So here is the question:

Buliding is worth $20,000 per hazard policy.

Loan officer wants $5,000 coverage with $15,000 deductible.
I know this is not acceptable.

Would $20,000 coverage with $10,000 deductible be acceptable?

The officer has seen his mistake, just took convincing he was wrong ha!

First, you'll need to determine the value of the building. $20,000 may be right, but that's the hazard insurance policy. Flood can be different.

If $20,000 is the value, you have to have $20,000 in coverage (not $5,000). This assumes the loan amount is more than $520,000 (combined value of main and outbuilding). You can have a deductible of $15,000. Deductibles are up to the lenders but need to meet prudent standards (can the borrower afford it? etc.).

The loan amount is well above $520,000 and this customer can afford the $15,000 deductible.

I doubt this is the case in this scenario, but I'll ask anyways.

If the main structure is an apartment building (5+ units), the max insurance under NFIP is now $500,000. If the detached structure is non-residential, would it fall under the exemption for detached structures on residential properties?

Ok, I am going to have to call the insurance company but they are telling my loan officer that if we have a policy worth $20,000 with a $15,000 deductible, the customer has $35,000 in coverage and that $5,000 coverage with a $15,000 deductible would equal $20,000.

At no time have I ever heard that the deductible amount gets figured in the amount of coverage you have on a structure. Has anyone else heard this before?

Most insurance agents know less than nothing about flood insurance.

Ok, I am going to have to call the insurance company but they are telling my loan officer that if we have a policy worth $20,000 with a $15,000 deductible, the customer has $35,000 in coverage and that $5,000 coverage with a $15,000 deductible would equal $20,000.

Just have your borrower get a $20,000 policy with a $15,000 deductible. Don't waste your time with this agent.

We got what we had to have and is correct. It was a fun experience though!