Flood Insurance For Condos

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Question:

We have a customer that lives in a condo. There are three units in the complex. The property is in a flood hazard zone and the flood insurance is paid through the condo association. We have required the flood insurance. My question is what amount of insurance we should require. We know that there are other units and believe that there are mortgages on the units. The condo association has enough insurance to cover our mortgage only. Should we require more coverage? We are the only lenders listed on the policy. Is it our responsibility to find out if there are other outstanding mortgages on the other units? Any assistance you can give is greatly appreciated.

Answer:

Get a copy of the policy and see what is covered. At a minimum, the condo you are taking as security must be covered. If the association has the policy, the benefits are probably split among the unit holders.

Also check for provisions on the coverage relative to the elevation of the unit. They may not be insuring upperstorey units on the theory that they won't get wet. But if the foundation is damaged .....

Finally, call FEMA. They have become very good about answering questions. They also have a helpful (but lengthy) booklet on condo insurance.

First published on BankersOnline.com 2/11/02