Why Flood Insurance is Necessary

An ounce of prevention

First American highly recommends voluntarily obtaining a flood insurance policy as a preventative measure, but the federal government actually requires flood insurance in certain situations:

1. Purchase of a home in a high risk flood zone

When you obtain a mortgage from a federally-backed lender, they are required by law to determine whether your property is located within a high-risk flood zone. If it is, they are also required to ensure that flood insurance is purchased and maintained on the property. In some cases, although they are not common, your lender may require flood insurance even if the property is outside of a designated high-risk flood zone.

2. A flood map change alters your flood status

Flood zones may undergo many changes over the course of time-new development, construction, population growth and flood mitigation efforts all have an impact on flood zone boundaries. To keep up with a community's ever-changing landscape, FEMA is continually updating and revising its maps to better reflect the community's actual flood risk. So it's possible that you may experience a flood map change sometime during your homeownership. You may suddenly find yourself in a high-risk flood zone, when you weren't in one previously. If your lender determines that this has happened, then they must require flood insurance to protect their collateral.

3. Federal disaster assistance has been previously received for flood damage

Properties that have received disaster assistance from the Small Business Administration (SBA) after a flood are required to have flood insurance coverage until the loan on the property is paid off. If there's no flood insurance and another flood damages the property, federal disaster assistance will be denied.

Flooding is the #1 natural disaster.

Most homeowners obtain insurance to protect their homes from disasters without knowing that damage from the nation's #1 natural disaster-a flood-may not be covered through their homeowner's insurance policy. Most of the time, the only way to protect your home from a flooding disaster is to obtain a separate flood insurance policy. Recovery from flood damage without insurance can be not only expensive, but also emotionally taxing. Even disaster assistance from the government generally isn't free; it typically comes to you in the form of a small business loan, which must be paid back-with interest. And that's available only if the flood is declared a disaster area by the President, which typically happens in less than 10% of natural events. (Source: FEMA publication "Flood Map Modernization: Frequently Asked Questions by Homeowners")

Because hindsight is always 20/20

Even if you live in a home that lies outside of a designated high-risk flood zone, you're still not off the hook from the risk of flooding. Roughly 25% of all claims paid by the NFIP are for policies in low- to moderate-risk communities. Are you willing to run the risk? (Source: FEMA Mandatory Purchase of Flood Insurance Guidelines September 1999)

Flood waters are rude. They don't pay attention to the boundaries on a flood map. Flooding isn't limited to rivers and lakes overflowing or tidal surges from tropical storms. We've seen flood damage occur when rainfall comes suddenly after months of dry weather in the middle of the desert, when snow melts that has nowhere to go but into people's homes, or even when a storm drain backs up and prevents rain from draining properly, flooding the street and leading to water seeping into houses.

And this has all happened in homes across the country that are outside of designated high-risk flood zones, leaving residents to replace soaked drywall, rugs, clothing, and water-damaged furniture and appliances without the aid of insurance payouts to fund their damage recovery.

Timing is everything: you can't make a last minute purchase of flood insurance.

If the creek is rising, before you call your insurance agent, go buy sand bags. By the time you get wind of a flood forecasted for your area, it's usually too late to protect yourself with flood insurance. In most circumstances, there's a 30-day waiting period before flood insurance goes into effect. There are some exceptions to that rule, but you'll want to contact our insurance agency at (800) 862-2070 for more information.