When it comes to mortgage loans, lenders generally have a few conditions that borrowers must obey. One of those conditions is having an insurance policy on the home. Some mortgage lenders require the borrower to have flood insurance, especially if the property is in a designated flood zone or is in danger of getting flooded if there is bad weather.
While a borrower is required to keep their home insured while they are still making payments, they aren’t obligated to do so once the loan has been paid off.
Here are a few things you need to know about flood insurance.
Mandatory Flood Insurance.
If your home is in an area at risk of flooding and your mortgage is from a federally regulated insurance company, you are required to have flood insurance. In some cases, a lender might require you to have flood insurance even if your property isn’t in an area at risk of flooding.
You Should Have Flood Insurance if You Live in a Flood Zone.
Since homeowners aren’t required to have flood insurance if they have paid off their loans, some people decide not to pay for flood insurance. Not having flood insurance can save you some money, but you also have to realize that living in an area with a great chance of flooding means there is a good chance your home will get flooded at some point. By having flood insurance, you won’t have to worry about your home and belongings being damaged by a flood.
Flood Insurance Costs.
In the United States, flood insurance is backed by the National Flood Insurance Program. The NFIP offers the policies through a network of national insurers to property owners and lenders. According to floodsmart.gov, the average cost of a flood protection policy is about $600 per year. Flood insurance policies can’t be cancelled regardless of the amount of flooding incidents.
Not Having Flood Insurance.
As previously stated, some people feel they don’t need flood insurance policies, so they refuse to pay for them. According to floodsmart.gov, the government does not require people that live in moderate to low-risk flood zones to have flood insurance even if they are still paying off their loans. However, the government recommends that people should have flood insurance even if they don’t have a mortgage. The damage caused by flooding can be very expensive, which is why the government recommends having it.
Getting Discounted Flood Insurance.
If you feel that you are paying too much for flood insurance, there are certain insurance providers that offer discounted flood insurance policies. Some companies offer a preferred-risk flood insurance policy, which costs much less than the standard flood insurance policy. You should ask your insurance provider about a discount before signing your policy.