The Special Flood Hazard Area
Some places are more likely to be flooded than other places. If you live in an area that floods, on average, every 100 years or less, you live in what is known as a Special Flood Hazard Area (SFHA). In order to get a mortgage in one of these areas, you will be required to have flood insurance. These areas have a 1% chance of getting flooded every year. If you are a renter in one of these areas, you will not have to have flood insurance, as you are not paying the mortgage. Similarly, if your home is paid for, you won't be required to get flood insurance. Whether you are required to purchase flood insurance or not, if you live in a SFHA, you probably should purchase flood insurance. Renters might even want to purchase flood insurance, although only on their belongings, as they are not responsible for the structure.
Living Outside the Special Flood Hazard Area
Living outside the SFHA doesn't make you immune to flooding. Nearly 25 percent of homeowners that have made flood insurance claims since 1978 have lived outside of areas that normally get floods. Many homeowners that are not required to have flood insurance don't get it. While they may be perfectly fine if they live on the top of a hill, They may regret not purchasing flood insurance if they live in a valley and a freak storm caused flooding. Because flood insurance premiums are based on whether you live in an area that is likely to experience flooding or not, if you do not live in an SFHA, your premiums will be lower.
Insurance Does Not Take Effect Immediately
Flood insurance is not something that you can purchase an hour before you think you might need it. In most cases, you will have to have a flood insurance policy for thirty days before you can make a claim. If the weatherman announces that next week he expects heavy rains like no one has ever experienced in your area before, it's already too late to purchase flood insurance. If you think that your home even has a remote chance of being flooded, the time to act is now, before the warning signs for flooding occur.