Flood insurance is not required on (i) a loan with a principal amount of $5,000 or less and a repayment term of one year or less, (ii) on a loan secured by state owned property covered under a self-insurance policy approved by FEMA or (iii) any structure that is a part of any residential property but is detached from the primary residential structure of such property and does not serve as a residence.
A structure that is a part of a residential property is a structure used primarily for personal, family, or household purposes, and not used primarily for agricultural, commercial, industrial, or other business purposes. A structure is "detached" from the primary residential structure if it is not joined by any structural connection to that structure. “Serve as a residence” is based on a good faith determination by the Bank that the structure is intended for use or actually used as a residence, which generally includes sleeping, bathroom, or kitchen facilities.