Maximum Amount of Flood Insurance

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Question:

Can you please clarify the amount of flood insurance a loan in a flood zone must have? I believe there is a maximum of $250,000. We have been requiring our borrowers retain flood insurance in the amount of the loan, not the appraised value of the home. Is that correct?

Answer:

You must ensure that borrowers purchase flood insurance coverage at least equal to the following minimums:

Outstanding principal balance of all loans secured by the property;
The "insurable value" of the property minus the land value (the improved property value);
The maximum insurance available under the principal flood insurance program.

The maximum amount of flood insurance from the NFIP (#3) is $250,000 for a residential structure and $500,000 for a non-residential structure. Refer to pages 26-27 of the FEMA Guidelines for more specific information.

First published on BankersOnline.com 1/04/10