ValueXpress recently obtained a commitment from its partner bank, Country Bank on a hotel located in Brooklyn, NY. A FEMA flood determination on form 81-93 required by the SBA found the property located in a Special Flood Hazard Area (SFHA). The SBA requires that borrowers obtain flood insurance under the National Flood Insurance Program (NFIP) on real estate and business personal property if any portion of a building that is collateral for the Loan, or any business personal property is located in a building that is located in a SFHA. The amount of flood insurance should be the lesser of the maximum amount of insurance available or replacement cost. It is important to note that the maximum amount of flood insurance available under NFIP programs is limited to $500,000 for both building and contents coverage, combined, so coverage in this case was limited to the lesser NFIP maximum of $500,000.
Flood Insurance coverage under the NFIP may be purchased through an insurance agent who will obtain the policy either directly through the NFIP or through a Write Your Own (WYO) company that has agreed to write and service NFIP policies on behalf of FEMA. Flood insurance also may be available from private insurers that are not federally backed.
Country Bank obtained a quote of $30,000/year for $500,000 of coverage for real estate and business personal property, which was exceptionally high. ValueXpress worked the private market and discovered that the base property insurance coverage provided $250,000 real estate and business personal property, and ValueXpress was able to purchase another $250,000 in the private market for a few thousand dollars/year, saving the client a substantial amount of money.