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?
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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.