First Time Home Buyers: Why Do I Need Flood Insurance?
Flood insurance is one of those expenses which can really catch first time home buyers off guard. So what is it, why do you need it, is flood insurance required, and how can you avoid the expense?
First time home buyers that are already financially stretching their budgets to the limit can find mandatory flood insurance a nasty surprise and frustrating inconvenience that often only rears its head mid-transaction. Being told you have to shell out even an extra $50 a month when you’ve already broken through the budget you set yourself to get the home that other family members really loved, can be hard to take. Even more so when you are buying a condo that is several stories up, and there doesn’t seem any likelihood of it ever being flooded.
Is Flood Insurance Required?
Mortgage lender flood insurance requirements are dictated by flood maps. Your mortgage lender will require mandatory flood insurance to be obtained and maintained if your new home, townhouse, or condo is in the 100 year flood plain. That means that if there is any chance of your property being hit by a freak once in a 100 years flood, they’ll want to be covered. Remember that flood damage can corrupt the structural integrity and function of a property even if just your neighbors underneath or the lobby actually gets wet. Let’s not forget what wild natural disasters like tsunamis can do. So even if the chances of flooding is negligible and even highly unlikely first time home buyers should be glad for coverage, and will certainly be happy they have it if there is a flood. After all; who wants to be on the hook for a big mortgage on a property they can’t even live in anymore?
The good news is that flood insurance is very inexpensive. It will definitely be one of the least expensive insurances you’ll ever have to get in your lifetime. For prospective first time home buyers that are extremely budget sensitive old surveys, elevation certificates, and appraisals, as well as current flood maps can provide clues, and may help reduce costs of determining the need for flood insurance on any given property (or not).
However, it is important to remember that flood insurance is distinctly different from regular homeowners insurance, wind storm insurance, and renters insurance. You may need all or none of these depending on what you are buying and where.
In summary; first time home buyers should recognize flood insurance as a good thing, expect and budget for it, and if finances are very tight, remember to check in advance of making an offer and looking for a home.