Q&A: Flood Insurance

Q. We closed on a house more than two months ago and just received a letter from the lender telling us we have to have flood insurance on the property. Shouldn’t the title company have done a survey and determined whether or not flood insurance was needed BEFORE they allowed us to close? How can they force us to take on this extra expense now?

A. It would be highly unlikely that a title company would close without a survey which stipulated whether or not the property was in a flood zone, therefore requiring flood insurance. The closing also should have included a “flood insurance certification” which would have declared that all parties were aware that no flood insurance was required.

However, mistakes do happen occasionally. It might have been missed or it might reflect a change in the flood map or very likely it means there was a situation where part of the neighborhood is in a flood zone and part of it is not. Your home might have ‘appeared’ to be exempt from the flood insurance requirement when, in fact, it was required.

Commitment to Cooperate

In the event there had been a recent change in the flood zone maps (or they just plain made a mistake) which means the property must be covered with flood insurance you no doubt signed a document at closing which states you would cooperate with all parties (Lender, title company or REALTORS®) if they needed you to help them with correcting forms, etc from closing.

Compliance Disclosure

Almost all closings also include a document which states you specifically agree to add flood coverage IF it becomes a requirement AFTER you have closed. Lenders have the right to have the collateral protected from risks such as floods and therefore the stipulation that flood insurance can be added , when deemed necessary.

I’m afraid you must continue the coverage. Flood insurance is pretty expensive and I know that can cut a good sized hole in your budget when you were not expecting it. But the real beneficiaries—You and Your Family.

Better to have it and not need it, then to need it and not have it.

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