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I plan to obtain a home equity loan. My property is in a Special Flood Hazard Area (SFHA). Will this affect my current flood insurance policy?

It depends. When you obtain the home equity loan, the lender must ensure that adequate flood insurance is already in place or require that additional flood insurance coverage be added to your existing flood insurance policy.

Under the National Flood Insurance Act, the mandatory flood insurance purchase amount for a one- to four-family, non-condominium residential structure is the lesser of

  • the outstanding principal balance of the loan(s), or
  • the maximum amount of insurance available under the National Flood Insurance Program (NFIP), which is the lesser of
    • the maximum limit available for the type of structure ($250,000), or
    • the insurable value of the structure (typically the replacement cost value of your home).

Some lenders may require more coverage than the minimum amount required by law to fully protect their collateral.

The junior or second lienholder should also ensure that the borrower adds the junior or second lienholder's name as mortgagee/loss payee to any existing flood insurance policy.

Refer to 42 USC 50 "National Flood Insurance Act."

Last Reviewed: April 2021

Please note: The terms "bank" and "banks" used in these answers generally refer to national banks, federal savings associations, and federal branches or agencies of foreign banking organizations that are regulated by the Office of the Comptroller of the Currency (OCC). Find out if the OCC regulates your bank. Information provided on should not be construed as legal advice or a legal opinion of the OCC.

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