When Flood Insurance Is Required (and When You Should Get It Anyway)

Flood insurance is required on a significant minority of home purchases and strongly recommended on many more. The tricky part is that the rules for when it's required are based on a map most people have never looked at, and the real-world flood risk often has very little to do with what's on that map.

The Lender Requirement

Under federal law, if you are buying a home with a mortgage backed by a federally regulated lender (Fannie Mae, Freddie Mac, VA, FHA, or any FDIC-insured bank), and the property is in a FEMA-designated Special Flood Hazard Area (SFHA), you are required to carry flood insurance for as long as the loan is outstanding.

An SFHA is any area with a 1% or greater annual chance of flooding , what FEMA calls a 100-year flood zone. On FEMA's flood maps, these areas are labeled with codes beginning with A or V. Zone A is general inland flooding; Zone V is coastal with wave action. Either one triggers the lender mandate.

Zones labeled B, C, or X are considered moderate or minimal risk. Federally backed lenders do not require flood insurance in these zones, but, as you'll see in a moment, that doesn't mean the risk is zero.