[Mollu]

If we are doing a loan where our commercial customer is a renter of a building that is in a flood zone and we are giving a loan with the collateral being the contents of the building (i.e.; our borrower is a mechanic renting garage and we take his equipment as collateral. Don’t we need to cover our collateral by getting contents/general purpose coverage?

[jholzknecht]

Mollu – you are the first to post a question or comment on our new website. Thank you for your interest. You caught me a little off guard here, we haven’t officially launched our website we are getting questions. We need to come up with an appropriate token of appreciation for being the first to use our site. Does anyone have any suggestions?

And now your answer:
The flood regulations require flood insurance on the contents of a structure only when both the building and the contents secure the loan, so you are not required to obtain flood insurance on the contents. But don’t confuse compliance with safe and sound banking practices. Getting flood insurance on the contents located in a building in a special flood hazard area is a safe and sound banking practice.

[Anonymous]

I have a question that is somewhat related to this one. Is there something about taking the contents as a “abundance of caution” that would trigger the requirement of flood insurance?

[Author]

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