Will my lender require flood insurance?
Answer five quick questions. See if flood insurance is required, the minimum your lender will ask for, and how that compares to what it costs to rebuild.
Want this in writing for your lender or agent?
Get a copy of your result by email, or ask Chris to quote it. Used only for your estimate and quote, never sold.
When does a lender require flood insurance?
When a home with a mortgage from a federally regulated or federally backed lender sits in a high risk flood zone, federal law requires flood insurance on the building. High risk zones are any zone that starts with A or V, such as A, AE, AH, AO, V and VE. Homes in Zone X, B or C are not required by federal law, though some lenders still ask for it.
How much flood insurance will my lender require?
The required amount is the lowest of three numbers: your loan balance, the $250,000 the National Flood Insurance Program offers for a home, or the cost to rebuild the building (its insurable value). Land is not insured, so the rebuild cost is often lower than the price you paid. This tool estimates rebuild cost at $225 per square foot, plus 25% for a basement.
Why the lender's minimum is not enough
The lender's number protects the loan. If it costs $400,000 to rebuild your home and your loan is $200,000, the lender only requires $200,000. After a total loss you would be $200,000 short. Your belongings are not part of the lender's requirement at all.
How soon do I need the policy?
Most federal flood policies have a 30 day wait before coverage starts, but a policy bought with a loan closing can start at closing. Private policies usually start in 3 to 15 days, and many require the first year paid up front. Start early so flood insurance never moves your closing date.
Questions about lender flood requirements
Does my lender require flood insurance in Zone AE?
Yes. Zone AE is a high risk flood zone, so a mortgage from a federally regulated or federally backed lender requires flood insurance on the building.
Is flood insurance required in Zone X?
Not by federal law. Some lenders require it anyway, so ask yours. Flooding does not stop at a map line, and homeowners insurance does not cover flood.
What is the most a lender can require?
No more than the lowest of your loan balance, the $250,000 federal program maximum for a home, or the cost to rebuild the building (its insurable value).
Will the lender accept a private flood policy?
In most cases, yes. Private flood policies are widely accepted for mortgages today. Ask your lender to confirm before you buy.
Does the lender require contents coverage?
No. The requirement covers the building only. Contents coverage for your belongings is separate, and we almost always recommend it.
Can I talk to a person?
Yes. Call 205-451-4294 or request a free quote, and Chris will review your situation.