This is a special type of insurance that covers future losses due to flooding, which is not covered by most homeowners policies. If your property is located in an area requiring the purchase of flood hazard insurance, the lender will ask that you demonstrate that you have this insurance and that you have added its name as a loss payee as part of the terms of the financing. As with homeowners insurance, flood insurance covers the risk of any loss due to flooding that may occur during the year for which the premium has been paid. A premium is payable each year.