FDIC FAQs – 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?

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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.
 
 
 
ADDITIONAL INFORMATION:
This Q&A was included in the FDIC’s Flood Insurance Videos, which were updated in 2016, which may be found here:   https://www.fdic.gov/news/news/financial/2016/fil16018.html
 

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