Flood Insurance Coverage - No Appraisal

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Question:

How do you handle not having an appraisal to assist in the calculation of flood insurance coverage for commercial or residential properties? Does the NFIP mandate that an appraisal be done?

Answer:

The NFIP does not mandate an appraisal, but the NFIP does mandate a minimum coverage for buildings located within a SFHA. Without establishing a value for the building how will you know you are in compliance with the flood insurance requirements? You must have an evaluation of the buildings by a qualified person. You could also look to the hazard insurance policy for the replacement cost shown for the building(s), but again you need to be satisfied that figure is accurate. To make a long answer longer, it is the financial institution's responsibility to ensure they are in compliance with the flood requirements. Without an evaluation you can't do that.

First published on BankersOnline.com 1/28/08