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Insurable Value

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  • #165926
    Vmack
    Participant

    I am new to this bank and reviewing the flood insurance amount for a loan. The Bank has typically used the appraisal or market evaluation to determine the insurable value for flood insurance calculations. The appraisal for this loan specifically states that the cost approach was not utilized in the analysis of the subject property. There are two appraisal evaluations included on this appraisal and they are based on the sales comparison approach and the income approach. I have read FDIC and FRB training materials that refer to using an appraisal based on a cost-value approach to establish the insurable value. Do we have a problem with this loan since we used the appraised value, and it was not based on a cost-value approach? Thank you.

    #165964
    kboatwright
    Participant

    I see a couple challenges with your question:
    1. You have stepped outside of the “typical” and will need to be able to explain why. Since this loan was treated differently.
    2. Insurable amount = Insurable value by way of the regulation. So does the policy you received indicate the what they valued and insured the property for without including the land? Land can not be used in the calculation.
    The regulation states; The insurable value of the building may generally be the same as 100 percent Replacement Cost Value (RCV), which is the cost to replace the building with the same kind of material and construction without deduction for depreciation.

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