Flood Insurance Requirements

The Federal Emergency Management Agency (FEMA) oversees federal flood insurance requirements for the United States. These requirements were established to ensure proper coverage for flooding and related damages.

Residency Requirements

People living in high-flood-prone areas are required by federal law to have flood insurance. If you purchase a home within a designated flood zone, you are required to have flood insurance to obtain the home loan.

Waiting Period

Flood insurance requires a 30-day waiting period for the policy to take effect. Exceptions are when there is an immediate need, such as in the case of flooding or if the flood map changes, causing the property to be included.

Coverage

Minimum coverage is based upon the loan amount and the value to replace the building. Properties are covered in the case of flooding or indirect results, such as mudslides, sewage backup or damaging sinkholes.

Mortgage Requirement

Mortgage lenders are required by law to ensure flood insurance is in place for property that is in a flood zone. The insurance must be active during the entire life of the loan.

Lender Requirements

Lenders must ensure flood insurance is in place before closing the loan. If a lender uses escrow accounts for taxes and other insurance, it must also use escrow accounts for flood insurance.

References

• FDIC: Summary of Flood Insurance Requirements
• FEMA: National Flood Insurance Program