Answers About Flood Insurance

Select from the following questions about flood insurance, forced placement of insurance, and escrow payments for insurance.


What is flood insurance?

Unlike a standard homeowner's policy, flood insurance covers losses to your property caused by flooding. Some of the things a standard flood policy will cover include—

You can also buy a flood insurance policy to cover the contents of your home, such as furniture, collectibles, clothing, jewelry, and artwork. When a property securing a loan is located in a Special Flood Hazard Area (SFHA), a national bank may not make, increase, extend, or renew any mortgage loan unless that property is covered by flood insurance.

At a minimum, the insurance coverage must equal the outstanding principal balance of the loan. Coverage must be obtained and maintained throughout the term of the loan.

To obtain coverage, you must live in one of the communities that have an agreement with the Federal Government. Flood insurance coverage is offered through the Federal Emergency Management Agency (FEMA) and its National Flood Insurance Program.

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How much can a bank charge for flood insurance?

Flood insurance premiums vary depending on the zone in which the house is located. Federal Emergency Management Agency (FEMA) engineers have designated a number of different flood zones, each having its own probability and severity of flooding.

Flood insurance can be purchased through insurance companies, which sell policies through their network of agents. The coverage is offered through FEMA and its National Flood Insurance Program.

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I applied for a mortgage loan, and the bank is forcing me to buy flood insurance. Can it do this?

Yes. If your home is located in what the government has determined to be a flood plain, or is in a Special Flood Hazard Area (SFHA), any federally regulated lender will require you to purchase flood insurance before you get a mortgage.

However, you do not have to purchase the flood insurance from the bank. It can be purchased through insurance companies, which sell policies through their network of agents. The coverage is offered through the Federal Emergency Management Agency (FEMA) and its National Flood Insurance Program.

On property that is not subject to the Federal flood insurance statutes, a requirement for flood insurance is a matter of contract between the lender and borrower.

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When I bought my home, it wasn't in a flood plain, but when I refinanced my mortgage, the bank said I had to buy flood insurance because the flood maps had changed. Can the bank require me to buy flood insurance?

Yes. If the bank learns that a flood map revision identifies a structure securing a loan as having been placed in a Special Flood Hazard Area (SFHA), the bank must notify you that flood insurance is required.

When a property securing a loan is located in a SFHA, a national bank may not make, increase, extend, or renew any mortgage loan unless that property is covered by flood insurance.

At a minimum, the amount of the insurance coverage must equal the outstanding principal balance of the loan. Coverage must be obtained and maintained during the term of the loan.

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The bank said that I need flood insurance, but I don't believe that my property is in a flood area. What can I do?

National banks determine if flood insurance is applicable based on a review of the appropriate flood maps. If you believe that the flood map used by your bank incorrectly identified your property as being in a Special Flood Hazard Area (SFHA), Federal law allows the lender and borrower to jointly apply to the Federal Emergency Management Agency (FEMA) to request a review of the decision.

Visit FEMA's Flood Map Assistance Center or call them at 1-877-336-2627.

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Why is the bank requiring escrow of my flood insurance?

When a lender requires the borrower to escrow for other funds associated with the loan—taxes, insurance premiums, or any other fees or charges—the escrow of flood insurance is mandatory.

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