Do You Need Flood Homeowners Insurance?
In general, flood coverage is only needed if you have a mortgage on your home and you reside in an area that is considered high-risk for floods. However, you should still consider getting flood coverage even if you don't meet either of these requirements. Most standard home insurance policies do not provide coverage for flooding. Therefore, you will probably need to buy a flood insurance policy to get coverage for floods. Read this article to learn more about whether you need to flood home insurance.
Flood Insurance Requirements
According to federal law, you need to buy flood insurance if your home is in a high-risk flood zone and you have a mortgage that is federally backed. An FHA loan is an example of a federally backed mortgage. A high-risk flood zone is considered an area with a 1 percent or greater chance of flooding. Such areas are commonly referred to as a 100-year flood zone.
The reason these requirements exist is that mortgage companies have a lot at stake when it comes to a property that has not been fully paid off. If a home is damaged or even destroyed in a flood, the homeowner may decide to stop paying the mortgage or leave the home. This will leave the mortgage lender with a useless property. The reason for requiring flood insurance is to reduce the amount of financial risk for both the homeowner and the mortgage lender.
Typically, private lenders will have the same requirements for mortgage holders in high-risk flood zones. However, federal law does not make it mandatory for private lenders to have these requirements.
If you purchase a policy that is backed by the National Flood Insurance Program (NFIP), you will be fulfilling these requirements. You may also be able to fulfill these requirements by purchasing a policy from a private insurer. However, you should keep in mind that not all lenders will accept a policy from a private insurer. You need to have enough insurance to cover the maximum limit of coverage or the total cost of your property's development.
Even if you are not required by federal law to have flood insurance, you should still consider purchasing a policy. After all, it's not only high-risk flood areas that are susceptible to floods.
For more information about whether you need flood homeowners' insurance, call (915) 599-2900 now or visit us at www.MtFranklin.com