Q: The bank has a blanket insurance policy in place from a private insurance company. Why does the bank still need the borrower to get a flood insurance policy to comply with the flood insurance regulation?
A: Flood insurance regulations are designed to protect the property owner’s interest. When a customer buys a flood insurance policy, or when a bank force-places a policy, that policy shows the customer as the “insured” party. Conversely, blanket policies usually protect only the bank’s interest. As a result, most blanket insurance policies do not meet Part 339 requirements.