This is a special type of insurance that covers future losses due to flooding which are not covered by most homeowner’s policies. If your property is located in an area requiring the purchase of flood hazard insurance, the lender will ask that you demonstrate that you have this insurance and that you have added its name as a “loss payee” as part of its requirements for the financing.
As with homeowner’s insurance, flood insurance covers the risk of any loss due to flooding that may occur during the year for which the premium has been paid. If the premiums are current, financing will not result in additional flood insurance premiums. Of course, as with homeowner’s insurance, a new premium is payable each year.