Statistics report that American households and businesses suffered a combined total of $1.2 billion in property damages from flooding in 2018.
If you live in an area that poses a high flood risk, flood insurance is something you should consider getting. It might not even be up to you in some cases, as some mortgage providers will require that you can get it before lending you money.
Read on as we dig deeper into flood insurance requirements for lenders.
The Basics of Flood Insurance Requirements for Lenders
When a financial institution gives out a mortgage, they take every possible step to make sure they get their money back. If a property they mortgage suffers flood damage while uninsured, this makes timely repayment far less likely.
Therefore, they make flood insurance mandatory for many borrowers.
However, flood insurance requirements are often handed down to the lenders themselves by the federal government. Since the introduction of the National Flood Insurance Act of 1968, lenders are prohibited from providing a mortgage in respect of some properties in the absence of suitable flood insurance coverage.
When Is Flood Insurance Necessary?
The Act mentioned above applies to properties situated in designated Special Flood Hazard Areas. However, this rule only affects federally-backed mortgages.
Some lenders may impose flood insurance requirements regardless of federal intervention. This is more likely if your house is in a particularly high-risk area or is especially susceptible to damage.
Even if flood insurance isn’t required by your lender, it’s something you should consider getting. If a flood should damage your home while you’re uninsured, the financial repercussions could be devastating.
Factors Affecting Flood Insurance Premiums
Whether flood insurance is required by your lender or not, you’ll want to keep your premium as low as possible. The following are some of the most important factors in relation to the calculation of your premium in all cases.
Flood insurance covers the contents of your home as well as the building itself. The more valuable these contents are, the higher your premium will be.
Special attention will be paid to immovable items on your ground floor, such as televisions and white goods.
Method of Construction
Certain homes are less susceptible to flood damage than others due to the way they’re built. Concrete homes are more resistant to damage than wooden ones.
Also, the higher your house is above ground level, the safer it is from floods.
No matter what kind of insurance you buy, you should always shop around. Premiums can vary significantly from one provider to the next.
Betterflood.com has a proven track record of providing affordable premiums for those most in need.
Keeping Your Home Protected
Flood insurance requirements for lenders can be inconvenient at times.
However, if you live in a high-risk area for flooding, you should get insurance regardless of these requirements. Such insurance is the only way to be certain that you will be able to recover financially in the event of a natural disaster.
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