Zone AE doesn’t mean that her new home has flooded before or will flood; it means it has a higher chance of it, and it also means that her lender will require her to buy flood insurance.
And this is what she was asking me about when she asked me the question about why her lender requires her to purchase a flood insurance policy.
When a mortgage company is lending to a client for any property, they always run what is called a flood zone determination (FZD). (example of what it looks like below).
The FZD comes back with an X flood zone most of the time, which means the lender will not have to require their borrower to purchase a flood policy.
However, in this case, the property she was looking at had a flood zone AE.
IN 1968 the government signed into law the NFIP or National Flood Insurance Progam to help keep the disaster relief fund from being over-taxed because most property owners couldn’t get flood insurance through a private flood insurance company.
The NFIP program intent was to be an option for properties that have a risk of flooding.
Over the years, FEMA, the Federal Emergency Management Agency, was to create maps of our counties’ flood risks, and today they mapped most of the country.
However, keeping up with changing weather patterns and massive development over the years is no small task. You see, these maps need to be updated often, and many are out of date.
When an FZD comes back as a zone AE your lender will require flood insurance.
The government requires all lenders that are backed by the FED to have borrowers buy flood insurance if the property is in the High-risk flood zones. Unusually identified as an A or AE.
Lenders and insurance companies use AE Zone flood insurance
Lenders depend on these maps to make sure they comply with the Federal Government.
And this is where the cost of Zone AE comes in.
The flood nerds will shop all the flood insurance options for zone AE to make sure you are getting the best price.
When this option makes sense for the property, we will offer this NFIP policy.
However, when a property is older than 1974, the NFIP calls “post firm,” meaning the home was built before the NFIP program had begun or before the flood insurance rate maps were created for this community.
In this case it will make more sense to place the policy with any one of the growing private flood insurance options available in Colorado.
We will shop for all flood insurance options for your property to ensure you and this client are getting the best coverage at the best price.
