General Flood Insurance Requirements by FEMA

The Flood Emergency Management Agency (FEMA) implements a list of flood insurance requirements that lenders need to comply before they can conclude an insurance policy with a borrower whose business or residential property is situated in a declared flood prone area. Mobile homes which fall into the category are as well subject to the terms imposed by the federal government. The following requirements are:

A lender is obligated to fully accomplish the Standard Flood Hazard Determination form which includes the assessment made regarding the property's vulnerability to flood using the Flood Insurance Rate Map and other related instruments.

Prior to the closing of an insurance policy, the insurer is required to secure a duly FEMA-approved notice to the borrower detailing the degree of the asset's exposure to flood. Related preventive recommendations should also be mentioned.

The insurers should see to it that the cost of insurance for upgraded buildings or related structure should not be lower than what the asset is worth of.

A lender or borrower who thinks that the real property is not susceptible to flood but has been designated as a flood hazard area by the FEMA must inform the agency. The borrower should acquire an approval from the agency or else both parties should conform to the flood insurance requirement which is to buy a flood insurance coverage.

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