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Calculating Flood Insurance

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Question: 
We have a customer who purchased property located in the Flood Plain. A Church was built in the middle of the property. A survey of the property has been prepared and the customer is in the process of filing a application for Loan to take this structure out. There are other structures on the property if the Church structure is taken out, do we just need to get flood insurance for the value of the other structures? If their value is less than our loan amount, how much coverage is required? The value of the other structures or the loan amount?
Answer: 

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Banks must insure that borrowers purchase flood insurance coverage at least equal to the following minimums:

  1. Outstanding principal balance of all loans secured by the property;
  2. The appraised value of the property minus the land value (the improved property value); and
  3. The maximum insurance available under the principal flood insurance program [generally, $250,000 for a residence and $500,000 for commercial buildings - but this is for each building].



First published on BankersOnline.com 2/17/03

First published on 02/17/2003

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