Q: A property had a shed in a SFHA but the insurance agent refused to insure it stating it had zero insurable value. The replacement cost was $1,000 but this was under a general policy and the policy was not residential. The bank tried to insure the shed with another agency but it refused. What should the bank do in these types of situations?
A: The bank could attempt to demonstrate the ‘insurable value’ with the agent because the bank cannot technically close the loan until appropriate coverage is in place. An insurance agent may provide guidance to the bank on how to determine insurable value and/or if the agent is indicating that there is no value the bank must document this (as noted above in response to Question # 22).
– This Q&A was included in the materials from the FDIC New York Region Regulatory Teleconference: “Flood Insurance – Flood Insurance Compliance and an Examiner’s Perspective” which took place on December 3, 2012. These materials may be found here: https://www.fdic.gov/news/conferences/NY/2012-12-03.html