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New Deductible Amounts for Flood Insurance

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Question: 
What are the new deductible amounts for flood insurance for both residential and commercial? Is a bank permitted to make its own reasonable limits on these deductibles?
Answer: 

As of 6/1/14, the flood insurance deductibles are:
a. Minimum:
i. Pre-FIRM (Flood Insurance Rate Map):
A.) Flood Insurance equal to or less than $100,000.00 = $1,500.00
B.) Flood Insurance greater than $100,000.00 = $2,000.00

ii. Post-FIRM (Flood Insurance Rate Map):
A.) Flood Insurance equal to or less than $100,000.00 = $1,000.00
B.) Flood Insurance greater than $100,000.00 = $1,250.00

b. Maximum:
i. Residential = $5,000.00
ii. Non-Residential = $50,000.00

Concurring the bank's permissions:
A lender may not allow the borrower to use a deductible amount equal to the insurable value of the property to avoid the mandatory purchase requirement for flood insurance. [Interagency FAQ #17]

...it is not a sound business practice for a lender to allow the borrower to use the maximum deductible amount in every situation. A lender should determine the reasonableness of the deductible on a case-by-case basis, taking into account the risk that such a deductible would pose to the borrower and lender. [Interagency FAQ #17]

First published on 07/19/2015

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