Does Home Insurance Require Flood Insurance?

Homeowner’s Insurance Costing Customers Thousands in Wasted Dollars: What You Need to Know

Hey there, folks! Chris Greene here. with The Flood Insurance Guru. Today, we’re diving into a topic that could be costing you thousands of wasted dollars: homeowner’s insurance. Specifically, we’re talking about the hidden costs and unexpected requirements that come with it. 

The Hidden Costs of Homeowner’s Insurance

More than 12 years ago, I bought a house in a flood zone, just like many of you might be considering or have already done. About two weeks before closing I was told my flood insurance costs where going to be more than $3000. This was a hidden cost of insurance that I did not expect. Since then, I’ve dedicated my career to helping homeowners navigate the complexities of flood insurance. Today, we’re tackling a big issue: homeowner’s insurance companies potentially costing you thousands by requiring flood insurance, even when your bank doesn’t.

You might be wondering, can homeowner’s insurance companies require you to purchase flood insurance even if your bank doesn’t? The answer is yes, they absolutely can. This largely depends on the underwriting policies of the insurance company you’re dealing with.

We’re seeing more and more cases where, despite flood insurance not being a requirement from your mortgage lender, the home insurance company may still mandate it to ensure you’re fully protected. This is a crucial point to consider when you’re shopping for home insurance quotes. Always ask, “Are you going to require flood insurance?”

This is becoming more of a trend in parts of Florida where there are limited home insurance options. The state insurance program for Florida recently started requiring flood insurance. They weren’t just requiring it on the building but also the contents. We saw where it was costing one homeowner almost $6000 a year. Even though they had a flood risk score of less than 25 and were in flood zone X.

To understand this new practice, we must first understand the different flood zones. So let’s look at special flood hazard areas and the other areas. 

Special flood hazard areas (SFHA), sometimes called the 100-year flood area or high-risk areas, are areas where flood insurance is going to be required if you have a mortgage. These typically are flood zones A or V. Watch the video below to explain these different flood zones. 

Now let’s look at the other areas outside of special flood hazard areas.

These are typically referred to as low-risk or minimal-risk areas. These areas typically fall within flood zone X. If you have a mortgage then typically flood insurance is not going to be required in flood zone X. 

Why Would Home Insurance Companies Require Flood Insurance?

Why would a home insurance company require this? Well, it often boils down to risk management. Flood damage is typically not covered by standard homeowner’s insurance policies. Insurance companies want to make sure that if something does happen, there’s coverage in place

This is especially common in high-risk flood zones, such as certain areas in Florida, where some insurers mandate flood insurance as a condition of providing home insurance.

Do You Need Flood Insurance: What You Need to Know Before Signing Up

When you’re taking out home insurance, it’s essential to ask the right questions. You don’t want to get to the closing table only to find out 30 minutes before signing that you now need an extra thousand dollars for flood insurance that your bank never mentioned. This can be a nasty surprise and a significant financial burden. 

When looking at getting home insurance you want to ask what the flood risk on the property is.

• Ask when the flood map last changed.
• Ask what the average cost of flood insurance is.
• Ask if the home insurance company is going to require flood insurance.

Home Insurance or Flood Insurance: Separate Policies for Separate Needs

Remember, flood damage is generally not covered by homeowner’s insurance. This means you’ll likely need two separate policies: one for your homeowner’s insurance and one for flood insurance.

These policies are usually paid differently each year. If you have a mortgage, your payments might go through an escrow account, which is an account you pay into every month, and your mortgage company pays the insurance premiums annually.

No matter where you are located it is important to remember everyone has a different level of flood risk. Even some low-risk areas have a high flood risk score. So it’s important to be protected.

Making Informed Decisions

Understanding these requirements can be a deciding factor when choosing your home insurance provider. Whether you’re in a high-risk flood area or not, knowing if flood insurance is required can save you from unexpected costs and headaches down the line.

Types of Flood Insurance

The Role of the National Flood Insurance Program (NFIP)

The National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency (FEMA), is a crucial element to consider when discussing flood insurance.

The NFIP provides flood insurance to property owners, renters, and businesses, helping to mitigate the impact of flood damage. However, there is a 30-day waiting period for new policies to take effect, so planning is essential. There is an exception on wait periods for properties that have a real estate loan closing.

Private Insurance Options

In addition to the NFIP, private insurance companies also offer flood policies. These private options can sometimes provide more comprehensive coverage or better rates, depending on your specific flood risk and location. It’s worth discussing these options with your insurance agent to determine the best coverage for your needs.

Filing a Flood Insurance Claim

In the unfortunate event that you need to file a flood insurance claim, it’s important to understand the process. Whether you’re dealing with an NFIP policy or a private flood insurance policy, knowing the steps to take can make a significant difference in how quickly and efficiently your claim is handled. Make sure to document all damage thoroughly and report your claim as soon as possible.

I hope this blog has helped you understand the crucial questions to ask when taking out home insurance. If you want more detailed information, feel free to download our comprehensive guide to flood insurance linked in the description below. 

I’m Chris Greene, your Flood Insurance Guru, and I look forward to helping you navigate these waters in our next blog.