Flood Insurance: What Real Estate Professionals Should Know

By Ann Heinz, JD, CDEI
Sep 22, 2022
Flood Insurance: What Real Estate Professionals Should Know

Floods are disastrous, and they’re getting bigger and more destructive. While standard homeowners insurance may cover certain types of water damage—such as burst pipes that damage a basement—it won’t cover a home damaged by flooding. That's why every homeowner in a flood-prone area should consider flood insurance and why every real estate professional should do their best to educate their clients on flood insurance.

Flood insurance covers your home and possessions when there’s a flood. There are two policies; you can buy either one or both. One covers your building up to $250,000, and the other covers personal property up to $100,000.

Most flood insurance is purchased through a federally regulated program, the National Flood Insurance Program (NFIP). Flood insurance is also offered by private insurers.

What Does Flood Insurance Cover?

A building property policy covers the value of the home or the cost to rebuild or repair, up to the policy limit. It does not cover trees, patios, fences, vehicles, wells, septic or any damage to the land. It does cover the building, its foundation, electrical, plumbing, HVAC, water heater, appliances, carpeting, walls, blinds, built-in cabinets and detached garages.

A personal property policy covers clothes, furniture, electronics, rugs, portable appliances such as microwaves, window ACs and freezers and their contents. There is limited coverage, up to $2,500, for valuables such as furs and art. It doesn’t cover items best kept in a safe deposit box, such as precious metals, stock certificates and bearer bonds.

What Real Estate Agents Need To Know

Real estate professionals play an important role in educating clients and consumers in the community they serve. Clients rely on you to inform them of potential risks to their current or prospective homes, including flood risk.

Real estate agents need to understand the flood risk in the areas where they do business. If the agent represents a seller, the agent and client must know their flood zones. Since zones can change, they should look at the current zone map.

Flood risk must also be disclosed to buyers. In fact, twenty-nine states have some type of flood disclosure requirement. This means that sellers in these states must notify buyers in some fashion whether a property has been previously damaged by flooding or inform them about the extent of previous damage.

Since laws on flood disclosures vary, it’s crucial to understand your obligations in the state where you practice real estate. In general, a licensee must disclose the following facts when they have actual knowledge:

  • Read-it-to-me audio for all course content 
  • that the property had a flood event in the past from any source
  • that a property is in an area where flood insurance is required
  • that flood insurance was required in the past
  • that the property is located in an area that has flooded in the past
  • that the property is located in an area subject to flood risk that may cause many or most owners to purchase flood insurance

Learn More About Flood Insurance

Flood insurance is usually optional for homeowners with mortgage loans in low-risk flood areas, and it may not be required even for those in high-risk flood areas with certain types of mortgages. But homes and businesses in high-risk flood areas with government-backed mortgages are required to have flood insurance. As a real estate agent, you need to be aware of your clients’ funding mechanism and whether the property’s location will trigger flood insurance requirements. Even if your clients’ purchase does not require flood insurance, it would be a good idea to inform them of the benefits of flood insurance.

As a real estate professional, you can make sure you have the knowledge and advice to offer your clients by learning more about flood insurance with WebCE. WebCE is excited to offer the online course Flood Insurance 2.0 designed for real estate agents, brokers, and salespersons. This course provides crucial information about what flood insurance is, how to help your clients understand their flood risk, and how floods can affect their properties and their health.