Because many renter's insurance policies cover flood damage of your belongings, it might seem logical that homeowner's policies also cover flood damage. That's logical, but wrong. The Federal Emergency Management Association determines if your land is in a flood zone and designates it with a letter code. If you live in certain flood zones, you must purchase flood insurance. Understanding the flood zone codes is key to meeting those federal requirements.
FEMA uses Flood Insurance Rate Maps, or FIRMs, to show the codes throughout the country. The maps, which are based on historical flood data, assign a probability of flooding to each location. For example, if FEMA determines your area has a less than 1 percent chance of flooding, it's a low to moderate risk. Anything 1 percent or higher is considered a high risk. Anyone living in a high-risk area is required to buy flood insurance.
Each zone is designated by a letter, some of which are followed by a number to help separate zones into categories. Zones B, C and X are low to moderate risks. Any code containing an A, such as AE or A99, are high-risk zones. Coastal areas, all of which are high risk, start with V. If FEMA hasn't conducted a historical flood study in your area, it's designated with a D. That signifies an undetermined risk area.
Your flood zone might be called by identified by something besides the letter code. A 500-year flood zone doesn't mean your house is likely to flood every 500 years. Instead, it refers to areas with a 0.2 percent annual chance of flooding. You may hear terms like flood transition area too. That's land next to a high-risk area, such as near a coastal area but not on the beach. A floodway is the area right next to a river or waterway. Most states won't let you build in a floodway. You can, however, build on most floodway fringe areas, which are outside the floodways but still considered high risk.
Flood insurance is available in all zones through the National Flood Insurance Program. Many insurance agents who sell homeowner's insurance also sell flood insurance through the national program. The rates are set by the federal government, so everyone in the same area pays on the same schedule. The cost of flood insurance varies by your zone code. If you live in a D or B zone, where the flood risk is undetermined, low or moderate, the cost is typically less than what they're paying in a high-risk zone.