Answers about Flood Insurance

How much can a bank charge for flood insurance?

Flood insurance premiums are calculated based on factors such as:

  • Year of building construction
  • Building occupancy
  • Number of floors
  • The location of the contents in the building
  • The flood risk of the building (i.e., its flood zone)
  • The location of the lowest floor in relation to the elevation requirement on the flood map (in newer buildings only)
  • The deductible you choose and the amount of building and contents coverage.

Flood insurance may 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 (NFIP).

If flood insurance is required in connection with a loan, but the borrower does not purchase the required amount of flood insurance, the lender must force place coverage and may charge the borrower for the cost of premiums and fees incurred in purchasing the insurance.  Force placed flood insurance coverage is often more expensive than coverage under a policy purchased directly by the borrower.

February 2011