A borrower obtains a $300,000 loan secured by a building valued at $400,000 in a Special Flood Hazard Area. The maximum NFIP coverage available is $250,000. What is the minimum required flood insurance coverage?
Correct Answer
A) $250,000
The minimum required flood insurance coverage is the lesser of: (1) the outstanding principal balance ($300,000), (2) the insurable value of the building ($400,000), or (3) the maximum amount available under NFIP ($250,000). In this case, $250,000 is the lowest amount.
Why This Is the Correct Answer
The minimum required flood insurance coverage is the lesser of: (1) the outstanding principal balance ($300,000), (2) the insurable value of the building ($400,000), or (3) the maximum amount available under NFIP ($250,000). In this case, $250,000 is the lowest amount.
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