Why You Should Purchase Home Flood Insurance Coverage

By Michael Diaz. May 7th 2016

Chances are that if your lender did not require you to buy flood insurance to get your home mortgage, you have never seriously thought about insuring your home for flood damage. This is a mistake. If it has ever rained near your home or you live near a body of water or dam, then you might want to consider getting a flood insurance policy. But what is flood insurance, how much does it cost and why should you consider buying a policy?

What Is Flood Insurance?

Flood insurance is exactly what it sounds like. It is an insurance policy that helps to protect you against property damage in the event of a flood. If you live in an area that is deemed to have a high flood risk, you will likely be required to buy flood insurance buy your mortgage lender. However, just because you are not required to buy a policy does not mean that you shouldn’t buy one.

Why Should You Consider Getting A Flood Insurance Policy?

  • Everyone Lives In A Flood Zone: Many people make the mistake of assuming that a flood could never happen in their area. However, a flood can occur anywhere that it rains or snows. It can also occur anywhere near a body of water, a dam or a drainage system. In short, everyone is exposed to some level of flood risk. Furthermore, the Federal Emergency Management Agency (FEMA) notes that almost 25 percent of flood insurance claims come from areas that do not have high flood risk. The odds are worse for those living in high risk flood zones where there is at least a one in four chance of flooding over a thirty year period. Therefore, it pays to plan ahead.
  • Homeowner’s Insurance Does Not Cover Floods: You might not be aware that your homeowner’s insurance policy does not cover flood damage. Therefore, if an unexpected flood occurs, you might be on the hook for thousands of dollars of damage to your home and possessions. Don’t get caught unprepared.
  • It Is Easy To Get: The US Government has a program called the National Flood Insurance Program (NFIP). The NFIP allows anyone to purchase flood insurance regardless of their relative flood risk (low, medium or high) as long as their respective community participates in the program. NFIP flood insurance is available from a variety of private insurance companies and agents.
  • It Is Affordable: The annual cost of coverage can range from $130 to around $1,000 depending on your flood zone risk and the amount of coverage that you purchase. This is relatively cheap when compared to other types of insurance coverage. The actual cost of flood insurance will depend on whether you live in a low, medium or high risk flood zone. FEMA determines the flood risk of a community. Keep in mind that the lower your flood risk, the lower the cost of the insurance will be.
  • Emergency Help From The Federal Government Is Not Dependable: Generally speaking, emergency monetary assistance from the federal government is only available if the President declares that the flooding event is a disaster. However, the majority of floods are not declared disasters by the President. Therefore, a flood insurance policy is the only way to guarantee protection in the event of a flood.

Tips For Purchasing A Flood Insurance Policy

  • Be Aware Of The Waiting Period: Many flood insurance policies have waiting periods before the coverage takes effect. This waiting period can be as long as a month. Therefore, it is wise not to wait until the big storm is about to hit before purchasing a policy.
  • Understand The Difference Between Building And Contents Coverage: There are two components to flood coverage. Building coverage covers flood damage done to the building, major appliances, electrical and plumbing systems, carpeting, central air conditioning equipment, paneling, wallboards, bookcases, cabinets, and furnaces and water heaters. Personal contents coverage takes care of personal belongings, curtains, window unit air conditioners, portable appliances, washers and dryers, and certain valuable items. You can get both types of coverage or only one. Note that you will have to pay more if you have a basement.
  • Rates Are Uniformly Set: Although you will have to buy your flood insurance through a private company or agent, all rates for flood insurance are set by the federal government. Make sure you purchase your insurance through a reputable company to reduce the possibility of fraud. It’s always a good idea to check with other insurance companies to make sure you are being quoted the same price across the board.

Now that you are up to speed on flood insurance, it’s time to decide whether you should purchase a policy. Look into the cost of a policy for your home. If it turns out to be trivial or if you live in a moderate to high risk flood area, you might want to buy a policy. It could end up saving you thousands of dollars when the unexpected flood hits.

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