Flood Insurance Considerations
The federal government requires all federally regulated or insured mortgage lenders to require borrowers to maintain flood insurance if the property to be mortgaged is in a high risk flood area.
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The federal government requires all federally regulated or insured mortgage lenders to require borrowers to maintain flood insurance if the property to be mortgaged is in a high risk flood area. Flood insurance is available only through the federal government in the form of the National Flood Insurance Program. The National Flood Insurance Program ("NFIP") is operated by the Federal Emergency Management Agency ("FEMA").
While the federal government offers flood insurance, it is purchased through
local insurance agents. It cannot be purchased directly from FEMA.
FEMA publishes flood zone maps that are available as part of the public records through the local governmental office or agency that is charged with maintaining land records as well as local and state emergency management agencies. Flood maps are also available online through the FEMA Flood Map Service Center.
If the property being mortgaged is in a high risk flood zone as shown on the FEMA flood maps, the borrower will need to obtain and maintain throughout the term of the mortgage, flood insurance through NFIP. However, flood insurance is also available for other properties regardless of location in relation to a high risk flood zone. If the basement of a home is prone to flooding due to poor lot drainage or for any other reason, it is possible for that property owner to purchase flood insurance. It is important to note that this flood coverage is available as a standard homeowner's property insurance policy does not cover damage caused by flooding. Water damage caused by burst pipes is another situation altogether.
Flood insurance is relatively inexpensive and is dependent, like all other types of insurance, on the amount of coverage desired. The NFIP website indicates that flood insurance can be purchased for as little as $129.00 per year. This is a small price to pay for peace of mind for those properties prone to flooding whether or not the property located in a high risk flood zone. If there is water in the basement when it rains, any damage caused due to flooding will only be covered by a flood insurance policy.
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