When Flood Insurance Is Required
There are certain situations where you will be required to buy a flood insurance policy, whether it’s a private flood insurance policy or coverage from the National Flood Insurance Program (often referred to as an NFIP policy ). If you don’t comply with the requirement or simply don’t have enough flood insurance in place, FDIC -supervised institutions or servicers may have to force-placed a flood insurance policy, meaning they will obtain the flood insurance for you and charge you accordingly.
All federally regulated or insured lenders must require flood insurance for buildings located in Special Flood Hazard Areas ( SFHAs ) with federally backed loans. This applies to you if your mortgage is federally insured or is a “conforming loan” secured by Fannie Mae or Freddie Mac, which are government-sponsored enterprises.
The lender will use the Standard Flood Hazard Determination Form from FEMA to determine whether your property is in a Special Flood Hazard Area, if you are required to obtain flood insurance, and whether federal flood insurance is available.
You’re only required to get flood insurance if your mortgage lender requires it and your property is in a high-risk flood zone. You are only required to keep the coverage for the term of the loan. If you own your home and don’t have a mortgage, you don’t have to buy flood insurance, even if you’re in a high-risk area, although it’s still a good idea.
There’s no one required amount, as the amount of flood insurance you need depends on how much it would cost to rebuild your property and the maximum amount of coverage that’s available to you. However, it’s a good idea not to just settle for the minimum amount of coverage. You may want to get more to make sure your home and possessions are fully covered in case of a flood.
Not sure whether flood insurance will be required for you? Property owners can check out their flood risk at floodsmart. gov or on FEMA ’s flood maps. If these websites say your property is in a high-risk area, your lender or loan servicer will probably want you to buy flood insurance. The final decision on flood insurance requirements comes down to flood insurance rate maps and an official flood zone hazard determination.