For flood insurance purposes, how should we determine the proper value of flood insurance when the insurer is unwilling to provide us with a replacement cost value (RCV)?
FDIC, in the Flood Disaster Protection section of the Compliance Examination Manual provides:
‘In calculating the amount of insurance to require, the lender and borrower (either by themselves or in consultation with the flood insurance provider or other appropriate professional) may choose from a variety of approaches or methods to establish the insurable value. They may use an appraisal based on a cost-value (not market-value) approach, a construction-cost calculation, the insurable value used in a hazard insurance policy (recognizing that the insurable value for flood insurance purposes may differ from the coverage provided by the hazard insurance and that adjustments may be necessary; for example, most hazard policies do not cover foundations), or any other reasonable approach, so long as it can be supported.’
p. V-6.18, Q/A #9: https://www.fdic.gov/regulations/compliance/manual/5/v-6.1.pdf”
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