Q: How much insurance is required on a building located in an SFHA in a participating community?
A: The amount of insurance required by the Act and Regulation is the lesser of:
• The outstanding principal balance of the loan(s) or
• The maximum amount of insurance available under the NFIP, which is the lesser of:
o The maximum limit available for the type of structure or
o The “insurable value” of the structure.
Example: (calculating insurance required on a nonresidential building):
Loan security includes one equipment shed located in an SFHA in a participating community under the regular program.
• Outstanding loan principal is $300,000
• Maximum amount of insurance available under the NFIP:
o Maximum limit available for type of structure is $500,000 per building (nonresidential building)
o Insurable value of the equipment shed is $30,000
The minimum amount of insurance required by the Regulation for the equipment shed is $30,000.
– This Q&A was included in the “Interagency Questions and Answers Regarding Flood Insurance.” For ease of collection, this has been obtained from the FDIC’s Compliance Examination Manual – April 2016, which may be found here: https://fdic.gov/regulations/compliance/manual/5/V-6.1.pdf