Is your property located in a flood zone? According to the Federal Emergency Management Agency, the answer is yes.

FEMA says all properties are in flood zones — it’s just a matter of whether that zone is considered low, medium or high risk.

There are two types of high-risk areas: special flood hazard areas and coastal high hazard areas.

FEMA says homes in special flood hazard areas have a 26% chance of experiencing a flood over the course of a 30-year mortgage. Coastal high hazard areas are subject to damage not just from floods but also from waves.

If you live in an area known for flooding, you might already be considering flood insurance.

But if you have a mortgage, you might not have a choice. Your lender might require you to purchase this coverage.

You can determine if a property will be subject to mandatory flood insurance before you purchase it.

Just contact an insurer that issues flood policies and give them the address of the property you’re considering. They can tell you if it’s in a high-risk area.

You can also look up a property’s flood risk at FEMA’s FloodSmart.gov website, though insurers may have more up-to-date information than the website.

If your lender requires mortgage insurance, you can cancel once you’ve paid off your home loan.

See our mortgage calculators, How Will Prepaying Change My Loan? and How Fast Will I Pay Off My Mortgage? to see if you might be able to ditch your lender-required flood policy early.

Why do lenders require borrowers to buy flood insurance?

Homeowners insurance does not cover flooding (It only covers water damage that originates from inside the home or from rain damage from a storm; the damaging waters cannot have been on the ground before entering your house.), and even a small flood can cause expensive damage.

Because lenders often have larger financial stakes in properties than borrowers do, especially on low-down-payment mortgages and mortgages that are only a few years old, a homeowner who experiences a flood might decide the smartest financial move is to walk away from a flood-damaged home, take the credit hit from the foreclosure, and start over.

The lender would get the home as collateral to sell and recoup a portion of its losses, but if the home is flood damaged, its value will be severely depressed.

If the home is covered by flood insurance, however, the insurance protects the lender’s interest in the property. Furthermore, the insurance gives the homeowner a means to rebuild, making him or her more likely to work through the rehabilitation process.

Flood insurance for low-risk areas can cost as little as $129 a year and is optional, but flood insurance for high risk areas can exceed $1,000 a year even if you choose the highest deductible ($5,000).

Unless flood insurance is inevitable in your area, you’d be wise to choose a property in an area that FEMA considers low risk.

Not only will you save thousands of dollars in mandatory flood insurance premiums over the life of your mortgage, your property will be subject to one less hazard.

That being said, flood insurance can be a good investment even if your risk is judged as low or moderate, because 25% of claims come from low-to-moderate risk areas.

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