What is flood insurance?

Unlike a standard homeowner's policy, flood insurance covers losses to your property caused by flooding.  Some of the things a standard flood policy will cover include-

  • Structural damage to the building and its foundation
  • The electrical and plumbing systems
  • Furnace, water heater, and central air conditioner
  • Refrigerators, cooking stoves, and built-in appliances
  • Permanently installed carpeting over an unfinished floor
  • Flood debris cleanup

You can also buy a flood insurance policy to cover the contents of your home, such as furniture, clothing, food freezers and the food in them, portable air conditioners, and certain valuable items, such as artwork and furs (up to $2,500).

Policies are available in three forms: Dwelling (for most homes), General Property (for example, for apartment buildings and businesses) and Residential Condominium Building Association (condominiums).

When a property securing a loan is located in a Special Flood Hazard Area (SFHA) in which flood insurance is available under the National Flood Insurance Act, a national bank or federal savings association (collectively, bank) may not make, increase, extend, or renew any mortgage loan unless that property is covered by flood insurance.  

Under the Act, the mandatory flood insurance purchase amount is the lesser of:

  • The outstanding principal balance of the loan(s), or
  • The maximum amount of insurance available under the National Flood Insurance Program (NFIP), which is the lesser of:
    • The maximum limit available for the type of structure ($250,000 for one-to-four family non-condominium residential structures and $500,000 for other non-condominium residential or  nonresidential structures), or
    • The insurable value of the structure.

Coverage must be obtained and maintained throughout the term of the loan.

To obtain federal flood insurance coverage, you must live in a community that participates in the NFIP.  The community must establish its eligibility to participate in the NFIP by adopting and enforcing certain floodplain management ordinances.  Although purchased through private insurance companies, federal flood insurance coverage is provided by the Federal Emergency Management Agency (FEMA) and its NFIP.  Flood insurance coverage may also be provided by private insurance companies.

September 2019