Flood Insurance Coverage Requirements By Mortgage Lenders

Flood Insurance Coverage Requirements By Mortgage Lenders

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About Flood Insurance Coverage Requirements By Mortgage Lenders

Flood insurance policies cover physical damage to your property and possessions. Flood insurance is mandatory by mortgage lenders if the property is located in a flood zone. Homeowners insurance is required no matter what on all financed properties with a mortgage. However, if the property is located in a national flood zone, flood insurance is also required in addition to homeowners insurance.

  • Just because homeowners haven’t experienced a flood in the past, doesn’t mean they won’t in the future
  • Flood risk isn’t just based on the history of the property; it’s also based on a number of factors
  • Other factors include the amount of rainfall, river-flow and tidal-surge data, topography, flood-control measures, and changes due to building and development in the subject area

Flood Insurance Policy

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The normal homeowner’s insurance policy coverage limits for Building Property goes up to $250,000 and Personal Property (Contents) should be insured up to $100,000.

  • I encourage my clients to purchase both types of insurance
  • This holds true especially for homeowners flood zones

Floods can do severe damage to a home. Many times a home that has been damaged due to a major flood needs to be demolished and rebuilt from scratch.

Do Lenders Require Flood Insurance?

Lenders require flood insurance to protect the investment of the asset that has their loan attached.

  • Flood is a risk that is not normally on a regular insurance policy
  • Since a flood could destroy a home and foundation, the lender wants to protect the property and ensure that there is little probability that the home will be unlivable
  • Flood insurance is available to homeowners, renters, condo owners/renters, and commercial owners/renters

Costs vary depending on how much insurance is purchased, what it covers, and the property’s flood risk.

What Does Flood Coverage Do?
What Does Flood Coverage Do?

Many things are covered by flood, for instance, the insured building and its foundation, the electrical and plumbing systems, central air-conditioning equipment, furnaces, and water heaters, refrigerators, cooking stove:

Items normally not covered can vary, I will list just a few items not covered by flood insurance:

  • Currency, precious metals and valuable papers such as stock certificates
  • Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools
  • Living expenses such as temporary housing
  • Financial losses caused by business interruption or loss of use of insured property

Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your policy).

Does My Homeowners Insurance Cover Flood?
Does My Homeowners Insurance Cover Flood?

If a flood happens and homeowners don’t have a flood policy, most likely their regular insurance policy will not be able to assist.

  • Most policies don’t have proper riders and coverage already and without flood coverage, the asset could be in jeopardy

To be sure that you are fully protected from all of nature’s flood risk and damage to home or property contact homeowners insurance agent.

About The Author

Tammy Trainor is an associate contributing editor for Gustan Cho Associates.Tammy Trainor is one of the leading experts in the insurance and real estate industry.If you are a home buyer and have a higher debt to income ratios and the insurance quote you were quoted has increased at the last minute prior to a clear to close, do not hesitate to contact us at Gustan Cho Associates. The team at Gustan Cho Associates has helped countless home buyers and homeowners with the lowest and best homeowners insurance premiums. 

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