Which of the following responses describes the required amount of flood insurance coverage?

Which of the following responses describes the required amount of flood insurance coverage?
A . The original appraised value of the home
B . The outstanding principal balance of the loan
C . The minimum amount of National Flood Insurance Program coverage available
D . The property value on file with the county property valuation administrator office

View Answer

Answer: B

Explanation:

Flood insurance coverage is required to cover the lesser of:

The outstanding principal balance of the loan, or

The maximum coverage limit available under the National Flood Insurance Program (NFIP), which is $250,000 for residential properties.

The purpose of flood insurance is to protect the lender’s interest in the property, ensuring that the loan amount is covered in the event of a flood.

The appraised value of the home (A) and the property value on file with the county (D) are irrelevant in determining flood insurance requirements.

References:

National Flood Insurance Program (NFIP)

FEMA Flood Insurance Guidelines