The hazard insurance section of standard homeowners insurance policies does not cover flooding from external natural causes, like heavy rainstorms, or man-made ones, like a dam break. Only specifically named flood insurance, a separate insurance policy, can protect against that sort of destruction or damage.
Flood insurance is usually optional for mortgaged homeowners in what are normally considered low-risk flood areas. It may even be optional for mortgaged homeowners in high-risk flood areas, depending on the type of loan. However, homeowners will be required to buy flood insurance if they take out a mortgage from a lender that is federally regulated or insured (such as an FHA mortgage) and buy a home in a high-risk flood zone (also known as a Special Flood Hazard Area). In most cases, the homeowner will have to pay for flood insurance every year until the mortgage is paid off.
KEY TAKEAWAYS
· Flood insurance is often required by mortgage lenders when properties are located in federally designated high-risk flood zones or floodplains.
· Flood insurance is a separate policy from homeowners insurance, which doesn't typically cover damage or destruction by floods.
· Lenders usually only require flood insurance to cover the property structure, though borrowers can also buy coverage for their personal belongings and furnishings.
· Flood insurance is available through the federal National Flood Insurance Program (NFIP) for homeowners in high-risk areas and other participating communities.
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