Amount required on building and contents

Posted By: rhospa

Amount required on building and contents - 01/13/22 04:32 PM

We have a loan secured by commercial property that is located in a SFHA. The loan is also secured by inventory. We have the required minimum of $500,000 in flood insurance on the building. Would we need an additional $500,000 (or value of the inventory, if lower) in flood insurance on the contents, or would we still just be required to have a total of $500,000 but split it between the building and the contents?
Posted By: Dan Persfull

Re: Amount required on building and contents - 01/13/22 04:45 PM

What's the loan amount?

If your loan amount is $600,000 and the insurable value of the building is $750,000 and the insurable value of the contents is $375,000 then you need $600,000 in coverage.

Non-residential coverage for both the building and contents is $500,000 each under the NFIP.
Posted By: BA13

Re: Amount required on building and contents - 05/10/22 08:07 PM

To make sure I understand the non residential w/contents coverage, if the lessor of is the maximum under the NFIP $500,000 building + $500,000 contents, can the borrower allocate $800,000 to the building and $200,000 for contents?
Posted By: rlcarey

Re: Amount required on building and contents - 05/10/22 08:45 PM

No - the maximum per building is $500,000. How can you allocate $800,000 to the building?
Posted By: BA13

Re: Amount required on building and contents - 05/10/22 09:52 PM

I'm sorry, my other pertinent information isn't above and I thought it was, wow! For an example of total insurable value for the building and contents = $1.9M, loan at $1.6M so that leaves the $1M maximum, correct? Coverage can be allocated between the two to meet the lessor of requirement.
Posted By: rlcarey

Re: Amount required on building and contents - 05/10/22 09:56 PM

For an example of total insurable value for the building and contents = $1.9M

You cannot combine the insurable values. You have to know what the insurable value is for the building and what the insurable value is for the contents. You cannot insure contents for $500,000 if the content's insurable value is $200,000 and the building's insurable value is $1.7MM.
Posted By: RVFlyboy

Re: Amount required on building and contents - 05/18/22 12:49 PM

Just to be clear, $500,000 is the maximum available under the NFIP for the building. If the building has an insurable value of $1.7M and the contents $200K, flood regs would require you to have $700K in insurance - $500K for building and $200K for contents. For your $1.6M loan, you may want to require an additional $900K in private flood insurance on the building. That's a credit risk exposure you need to address.
Posted By: BA13

Re: Amount required on building and contents - 05/20/22 05:56 PM

Thank you both for the help. We received additional information for the insurable value of the contents to determine that coverage (is less than the max $500,000) and will require additional private coverage on the building for risk exposure.