The amount of flood insurance coverage that an institution must require for a residential condo unit, including a condo located in a multi-story complex is the lesser of: The outstanding principal balance of the loan(s) or The maximum amount of insurance available under the NFIP, which is the lesser of: The maximum limit available for the residential condo unit or The “insurable value” (see Interagency Q&A Q9 2011) allocated to the residential condo unit, which is the replacement cost value of the condo building divided by the number of units.
Effective October 1, 2007, FEMA required agents to provide on the declaration page of the Residential Condominium Building Association Policy (RCBAP) the replacement cost value of the condominium building and the number of units. Lenders may rely on the replacement cost value and number of units on the RCBAP declaration page in determining insurable value unless they have reason to believe that such amounts clearly conflict with other available information. If there is a conflict, the lender should notify the borrower of the facts that cause the lender to believe there is a conflict.
If the lender believes that the borrower is underinsured, it should require the purchase of a Dwelling Policy for supplemental coverage. See Interagency Q&A 28 for additional information on calculations. Reference: Interagency Q&A 2011 Q28; Interagency Q&A 2011 Q9, (2011).