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Do Mortgage Loans Require Hurricane Insurance Coverage?

by Robert Alley

As part of the mortgage loan process, lenders require insurance on the real property that is securing the loan. The standard homeowners insurance policy is required for all homes. If a home is located in an area prone to hurricanes, then a wind damage policy and most likely flood insurance will also be required as a term of obtaining the loan.

Hurricane Insurance

What is commonly termed hurricane insurance is in reality a combination of windstorm and flood insurance. A standard homeowners insurance policy may or may not provide windstorm coverage. It depends on where the property is located. Homeowners insurance never provides flood coverage. Every homeowner should strongly consider windstorm coverage, whether required by a lender or not. Flood insurance is required by lenders for property in designated flood areas.

Windstorm Insurance

Windstorm insurance is a special policy sold in areas like Florida when homeowners insurance does not cover wind damage. Florida is a prime location for hurricanes and the high winds that accompany the storms. A lender in Florida would usually require windstorm insurance. This coverage provides protection for wind related damage including hail.

Flood Insurance

All homeowners insurance policies exclude flood damage, a key component of hurricane damage. Flood insurance is provided through the National Flood Insurance Program. This program offers affordable flood insurance for homeowners. As part of the mortgage loan process, every lender requires certification as to whether or not the home is in a flood zone. Many times the surveyor will make this certification on the survey of the property. If the home is in a flood zone, then flood insurance is required.

Time

Insurance companies stop issuing policies and increasing limits on existing policies when hurricanes are near. Flood insurance policies normally take effect 30 days after issuance. Time is critical. A homeowner cannot wait until the hurricane is about to strike to take out wind and flood insurance. For the homeowner who is not required by his lender to have wind and flood insurance, proper planning means a review of the homeowners policy to see if wind coverage is included. It means contacting an insurance company or agent about flood insurance. Hurricane damage can reach beyond the immediate coastline.

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