Bankers Compliance Consultants - Determining Insurable Value

Question: 

In our last exam, we were told to look at the appraisal’s replacement cost value or comps (if listed) rather than a tax assessed value when determining the insurable value of residential properties. 

Since the appraised value/comps are often older than the tax assessed value, what would you recommend?

Answer:

A tax assessed value generally isn’t a good indicator of the insurable value. 

We agree that it should not be used by itself to determine insurable value but it could be used as a component in an insurable value calculation.  Our interpretation has always been that there is a lot of leeway when determining insurable value, provided it is supported and consistent.  The Interagency Flood Insurance FAQs indicate that many different methods beyond RCV exist to determine insurable value (for example, demolition value, functional building cost, cost approach, hazard insurance, etc.).  Keep in mind that flood insurance doesn’t cover everything and RCV only pays in limited circumstances.  Thus, we don’t think it’s correct to only use RCV in all situations.

Join us for the Flood Insurance & the Insurable Value Intersection (Flash Webinar) on July 18, 2019. We will answer all the questions submitted during the live webinar, in writing.

Register HERE!

Published
2019/06/20