Flood Insurance Guidelines

If you’re getting a mortgage on a property which lies within a flood zone, the lender is required by legislation to call for flood insurance before making the loan. This type of insurance can be both complicated and costly, so comprehending flood insurance policies can allow you to browse through the procedure with your head above water.

Flood Determinations

Any time a lender makes, renews, extends or raises a loan secured by a building, it is required to ascertain whether that land lies within a special flood hazard area. This decision is done using Federal Emergency Management Agency maps outlining the flood threat of specific places. Whether this procedure shows your home to be in a flood zone, the lender will inform you and require that you carry flood insurance.

Flood Zones

In order to reveal the different levels of flood risk, FEMA has designed a method of communicating for various flood zones. Zones are designated by correspondence, and can be Zone A, V, B, C or X. Zones A and V have no less than a 1 percent chance of flooding every year, which makes them high-risk flood zones which require flood insurance. Zones B, C and X are somewhat reduced rated and do not require the purchase of flood insurance.

Insurance Coverage Requirements

If you are required to buy flood insurance, you must be sure the policy is correct or it may not be accepted by your financial institution. As stated by the Flood Disaster Protection Act, flood insurance must be equal to the outstanding balance of all loans against the property, the value of this structure or the highest available under the National Flood Insurance Program–$250,000 for residential buildings. When you obtain flood insurance, your agent will need details about your home and your mortgages to assist you get the correct amount.

Policy Requirements

The lender has to get your flood insurance plan before it closes or restarting your loan, due to federal rules. Furthermore, the policy has to be issued in the exact same risk level the lender found when determining your flood zone. If your lender said the home was in Zone A, the policy has to be issued showing a Zone A. Once the policy is in place, you are required to maintain it until your mortgage is paid off.


If at any time you enable your flood insurance policy to lapse, expire or be canceled, the lender will send you notification that you must get flood insurance in place. If you do not obey the notice, the lender is required by legislation to force-place insurance, meaning it will buy a flood insurance policy on your home, whether you consent, and charge you for it. Force-placed policies are often more costly than policies readily available on the public market, so it is in your very best interest to procure insurance if notified.

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