When is flood insurance typically required?

• A. Only for properties with basements.
• B. It is never required.
• C. If the property is in a designated flood zone or the lender requires it due to risk.
• D. Only if the borrower asks for it.

Answer: (C)

Flood insurance is required when the loan involves a property with flood risk that the lender wants protected. In practice, if a property sits in a designated flood zone (such as FEMA’s Special Flood Hazard Area), lenders generally require NFIP flood insurance as a condition of financing. Even outside those zones, a lender may require flood coverage if their risk assessment indicates potential flood exposure for the property. This is why the best choice is the one that covers both: a designated flood zone or lender-mandated coverage due to risk. The other options don’t reflect how lenders enforce insurance: it's not limited to basements, it's not never required, and it isn’t only if the borrower asks for it.