Coverage Amount Calculation
Your lender requires the LESSER of these three amounts:
The Three Options
Outstanding Loan Balance
(excluding land value)
NFIP Maximums:
$250K residential, $100Kcontents
Replacement Cost
of the structure (100% insurable value)
Critical Rules
Coverage must be maintained for entire loan term
No lapses allowed without triggering force-placed insurance
Must be updated if loan amount increases
Required Documentation Checklist
For All Policies
Property address matches loan application
Named insured matches borrower(s) exactly
Coverage amounts meet minimum requirements
Effective date on or before closing date
Lender named as mortgagee/loss payee
Documents to Provide
Declarations page with all coverage details
Mortgagee clause showing lender as loss payee
Proof of payment (full premium required)
FEMA Standard Flood Hazard Determination Form
Compliance aid statement (private policies only)
Avoid These Deal-Killing Mistakes
Waiting Until Last Minute
Starting 2 weeks before closing leaves no time to fix issues. Start 90 days early.
Wrong Coverage Amount
Underestimating coverage is a common rejection reason. Use the "lesser of" formula correctly.
Lender Not Named
If the lender isn't listed as mortgagee/loss payee, the policy will be rejected immediately.
Assuming Approval
Don't assume your lender will approve. Get written confirmation before closing