Everyone enjoys a nice rain but no one enjoys a flood.

Prospective home buyers are made aware that a particular home they are interested in is in a flood zone and therefore at risk of being destroyed by flooding. But often, they make the decision to go ahead and buy the home anyway. So, how are homes placed in flood zones and what can owners do to protect themselves in case of a flood?

Flood zones are determined by the Federal Emergency Management Agency, or FEMA. This government organization prepares detailed maps of every square inch of real estate in the country to identify the likelihood of a flood. Every lender will pull what’s called a flood certification, or flood cert, prior to issuing a loan. If the lender determines your prospective property is in a flood zone, you’ll probably need flood insurance.

Flood Plains

Each area is identified as a 10, 50 and 100 year flood plain. A 10 year flood zone means there is a one out of ten chance of a flood in a one-year period, a one in 50 chance, and so on.  A 10 year flood zone has a greater chance for a flood compared to a 50 and 100 year zone, for example.

When a home is purchased and the buyer seeks financing, the lender will access a database that will report whether or not the property address is in a flood zone. If the property is in a flood zone, the buyer may have to purchase additional insurance coverage to cover the likelihood of a flood. Standard homeowner’s insurance doesn’t cover floods from natural causes.

Ask a lender if your property is in a flood zone.

Elevation Certificate

If the home you plan to buy or refinance turns out to be in a flood zone, you may want to hire an engineer to work up an elevation certificate. This certificate will show where the flood line exists and whether or not the structure is in or out of the flood zone, or if it’s built above the potential flood area.

A word of warning though: an elevation certificate can be expensive. But, homes that are built on elevated ground on the property may escape the requirement for flood insurance, saving money over time.

Should You Buy Flood Insurance?

Flood insurance can be expensive, but it’s required when buyers are financing a property. If the home is in a flood zone, you may want to purchase a policy to be on the safe side, even if you aren’t financing the purchase or applying for a refinance.

So how do you know when a home is in a flood zone? When property owners list the home for sale, they are required to inform all potential buyers of the flood zone. If the seller is unaware and the flood zone is later identified by the lender, the buyer has three choices: pay the additional coverage for flood insurance, renegotiate the sales price of the home to reflect the additional cost of flood coverage, or walk away from the deal.

How Much is Flood Insurance?

Flood insurance premiums can vary greatly. According to the National Flood Insurance Program (NFIP), the average flood insurance policy costs $650 per year. Covering a structure and its contents with $125,000 in protection costs $1,322 per year. Your insurance agent will be able to give you an exact quote.

The maximum coverage is $250,000, so there’s no way to totally cover some more expensive flood-zoned homes. Take this fact into consideration if you plan to buy a larger home that’s within a flood zone.

Flood Zones and Refinancing

Sometimes flood zones change, so the home you bought ten years ago that wasn’t in a flood zone may be now.

If you go to refinance, you’ll be required by the lender to obtain flood insurance if you want the refinance to go through.

You can obtain flood insurance from most insurance agencies. Check first with the agent or company who provides your standard homeowners’ insurance.

Deciding what to do when a property in a flood zone is never fun, but you can avoid major financial loss in the future by getting the right insurance up front, or, if you’re looking to buy, avoiding the home altogether.