A borrower provides a flood insurance policy with a $150,000 building coverage limit for a property with a $200,000 outstanding loan balance. The property's replacement cost is $300,000. What is the minimum acceptable coverage?
Correct Answer
B) $200,000 - equal to the loan amount
The Flood Disaster Protection Act requires flood insurance coverage equal to the lesser of the outstanding loan balance, the maximum NFIP coverage available ($250,000 for residential buildings), or the insurable value. In this case, $200,000 (loan balance) is the minimum required.
Why This Is the Correct Answer
The Flood Disaster Protection Act requires flood insurance coverage equal to the lesser of the outstanding loan balance, the maximum NFIP coverage available ($250,000 for residential buildings), or the insurable value. In this case, $200,000 (loan balance) is the minimum required.
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