Flood Insurance Coverage Isn't Always as it Appears

The Flood Disaster Protection Act states that the required amount of flood insurance must be equal to the lesser of the following three things:

1. The outstanding principal balance of all loans secured by the property;
2. The insurable value of the property (minus the land value); and,
3. The maximum amount of insurance available for the property under the National Flood Insurance Program.

The above takes care of the compliance requirement. However, even when the regulatory requirements are met, it’s important for institutions to understand that there can still be safety and soundness concerns. Insurance industry standards can mean that the actual amount insurance will pay is much less than anticipated.

Jerod explains more in the video.

Published 2026/06/08