closing

flood insurance

Insurance that covers damage caused by flooding, which standard homeowners policies typically exclude. Federally regulated lenders require it for properties in designated special flood hazard areas, and coverage is available through the National Flood Insurance Program and private insurers. Policies often have a waiting period before taking effect.

Exam tip: Standard hazard insurance does not cover flood. If a property is in a special flood hazard area and has a federally backed loan, flood insurance is required.
Example: A buyer's lender sees that the home is in a FEMA flood zone and requires a flood policy before approving the loan.

1. An agent gives a buyer a personal estimate of the property's flood insurance cost and the likelihood of a rezoning. What is the best guidance?

Answer & explanation

Answer: B. Licensees should disclose known material facts but refer questions outside their expertise to qualified professionals to avoid misrepresentation. Refusing to discuss known facts at all would conflict with disclosure duties.

Related terms & state variants

closing escrow impound account hazard insurance underwriting

Sources

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Last verified: 2026-10-23