If you have a mortgage on your home and you reside in a flood prone area, then your lender probably requires you to purchase flood insurance. However, if you live in a moderate to low risk zone and your community participates in the National Flood Insurance Program, than you have the option of buying it or not buying it.
If you are questioning whether or not you should purchase flood insurance, your first question is probably “How much is this going to cost?” Federal Flood Insurance can cost just a few hundred dollars, or up to $10,000 a year depending on the risks your home poses. Here are some other facts that may help you make up your mind.
First off, your homeowners insurance does not cover flood damage. Most homeowner’s policies only cover rain damage. Once this water touches the ground and enters your home, it is a flood, and only flood insurance can pay for the damage. Here is an example: say that a tree limb damages your roof during a rainstorm, and a large amount of rainwater then damages your ceiling and floor. That will be covered by your basic homeowner’s insurance. But, say heavy rain causes the creek in the area to rise and overflow your home; that will only be covered by flood insurance.
To be more precise, the National Flood Insurance Program uses this definition of a flood:
“A general and temporary condition of partial or complete inundation of two or more acres of normally dry land or of two or more properties from overflow of inland or tidal waters, from unusual and rapid accumulation or runoff of surface waters from any source, or from mudflow.”
Almost everybody lives in a flood zone; it is just how much risk of a flood there is in your specific area. The NFIP can tell you your home’s exact risk of flooding. Zones A and V are high risk areas, and moderate to low risk areas are B, C, and D. If you’re in zone D, the risk isn’t as clear because the area hasn’t been mapped out yet. But you can still purchase flood insurance and these zones are only used to help determine policy rates.
Did you know, more than 20% of Flood Insurance Claims come from moderate to low zones? That means 1 out of 5, and that isn’t taking into account the homeowners who weren’t insured and couldn’t file claims. No one really knows just how many uninsured people there are, but only 18% of homeowners have flood insurance.
Many homeowners don’t realize that you can’t count on government aid. It comes in the form of loans which you will have to eventually pay back. Before you can even qualify for a loan, your area has to be declared a federal disaster zone, and this type of assistance is declared in less than half of all flooding events.
Also, did you know that the average flood claim is about $30,000? If you live where the water rises so high that emergency rescue crews would have to cut holes in your roof to rescue you, your potential flood loss could be a bit higher.
If you decide that you do in fact want to purchase flood insurance, you should create a home inventory and then estimate the cost of repairing and rebuilding your property. Those two combined make up your total potential loss.
FEMA has an online flood map locator that can estimate your premium and help you find an agent who sells federal flood insurance in your specific community.
Here are some questions to ask your insurance agent:
-What will and won’t be covered?
-Will my policy insure me for actual cost or just what they’re valued at?
-Are there additional expenses?
-Can my rates change?