Realtor Training: Lesson 4: Let’s talk flood insurance.  What is NFIP and why does it matter?

We’ve all been there, we have a buyer who finally found the home of their dreams…then you find out that it is in a flood zone!

Question: What is a flood zone?

Answer: According to FEMA, Special Flood Hazard Areas “are defined as the area that will be inundated by the flood event having a 1-percent chance of being equaled or exceeded in any given year. The 1-percent annual chance flood is also referred to as the base flood or 100-year flood.”

Because the home is in an area that the government has designated as a flood zone, if you want a mortgage on the home, the mortgage company will require a flood insurance policy.

Question: What is NFIP?

Answer:  The NFIP is the “National Flood Insurance Program.”  It is a program administered by FEMA.  Because floods are so damaging (just one inch of flood water can cause $25,000 of damage in a home), the federal government has developed this program to help homeowners .

Question: Does regular homeowners insurance cover floods?

Answer:  No.  If water naturally flows into a home, it is generally considered a flood, and is not covered by a regular homeowners insurance policy.

The NFIP will offer flood insurance to your buyers and the coverage is backed by the federal government.  The good thing is that it offers flood insurance.  The bad thing is that it has limited coverages and the pricing is very expensive.

Question: Can I only get flood insurance from the NFIP, or are there private companies that offer flood insurance?

Answer:  There are many insurance companies that offer flood insurance.  These companies don’t have the coverage restrictions that the NFIP has and the pricing is usually much lower than NFIP policies.  The only downside of a private company is that it is not backed by FEMA.

If you have flood insurance questions or if you have a client who needs flood insurance, please reach out to us and we can help!