Appraisal Minus Land or Insurance Replace Cost?

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Question:

With the talk of changes in flood compliance, I am finding myself confused about calculating adequate flood coverage. Are we currently to use appraisal minus land or insurance replacement? I know it would be one of those two or then the total of all loans or the maximum NFIP available. I am just not sure on the appraisal minus land or insurance replacement cost.

Answer:

It has never been appraisal minus land. The appraised value is a market value that may or may not have any relationship to the insurable value. Insurable value would be the replacement cost value on primary dwellings and actual cost value on all other structures.

First published on BankersOnline.com 2/4/13