Flood Insurance for Contents Required by FEMA?

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Question:

We have a borrower who has used real property as collateral located in a designted flood zone, and we have required flood insurance. Another entity related to this borrower is pledging contents as collateral (he doesn't own the real property). Would FEMA require flood insurance on the contents?

Answer:

Content insurance is required when a loan is secured by a building and by the contents located in that building. If you have one loan secured by both the building and contents, you'll need flood insurance on the contents. If this is two different loans (one secured by the building and another secured by the contents) you do not need content insurance.

First published on BankersOnline.com 8/30/10