- Your lender should notify you in writing if flood insurance is required.paperwork 3 image by chrisharvey from Fotolia.com
The federal government requires lenders to notify buyers of a flood insurance requirement several days before closing. In addition, people whose homes are damaged by flood and subsequently receive financial assistance from the federal government are required to buy flood insurance. These people must inform buyers of the flood insurance requirement. Renters in such property may also be required to buy flood insurance to cover the cost of the replacement of their possessions. Flood maps established by FEMA may also change, due to greater understanding of topography or when new development increases flood risk. When they do, a lender will notify home owners of a requirement to purchase flood insurance. - High risk areas are those in the 100-year floodplainflood image by Gail Ranney from Fotolia.com
High risk areas are those that have a one percent risk of flooding in any given year.That translates into a 26 percent risk over the life of a 30-year mortgage. High risk areas are sometimes known as the 100-year floodplain. FEMA also declares some areas to be at low or moderate risk of flooding. About 25 percent of flood claims come from areas with low or moderate risk of flooding. - Coverage is available for a building, its contents or both.flood sign image by Andrew Breeden from Fotolia.com
Even when a property is not in an area designated to be a high flooding risk, banks may require homeowners to purchase flood insurance. Similarly, homeowners can buy flood insurance even when their property is not in a high risk area. Flood insurance is subsidized by the federal government. A typical policy costs less than $570 per year in 2010. Floods are not covered by most homeowners policies. - Don't wait until there's a major storm brewing to buy. Many policies aren't effective for several days.home sweet home image by David Dorner from Fotolia.com
Flood insurance, though subsidized by the federal government, is sold through private insurance agents. Floodsmart.gov offers an agent locator that allows buyers to search by zip code. The website also offers a handy tool that allows homeowners to evaluate their flood risk by entering their address. - The flood insurance borrowed millions from the U.S. Treasury to pay for Hurricane Katrina.money image by cherie from Fotolia.com
Flood insurance policies are offered by the federal government because private insurers do not want to handle the risk and expense of floods. Floods happen to many homes at once, and they are difficult to predict, making it hard for insurers to charge enough money to cover the costs of flooding. Even the government has trouble collecting enough money to cover costs. According to the Government Accountability Office, "the program does not collect sufficient premium income to build capital to cover flood losses."
