Flood Insurance – Is it Worth the Expense for You?

by Gina Blitstein · 0 comments

One of the most potentially devastating disasters that can happen to your home and belongings is a flood. Even worse, most insurance policies DON’T automatically cover flood damage. This fact comes as a surprise to many people. Thankfully, flood insurance can be purchased separately, to prevent you from being left, “high and not-so dry.”

Not all areas of the U.S. run the same risk of flooding, which is probably a major reason that it’s not included under most homeowners’ policies. In certain areas of the country with a high risk of flooding, however, flood insurance is mandatory. According to FloodSmart.gov, the official website of the National Flood Insurance Program, administered under FEMA:

“Homes and buildings in high-risk flood areas with mortgages from federally regulated or insured lenders are required to have flood insurance. These areas have a 1% or greater chance of flooding in any given year, which is equivalent to a 26% chance of flooding during a 30-year mortgage.”

Flood Smart goes on to explain, “In moderate-to-low risk areas, the risk of being flooded is reduced but not completely removed. These areas submit over 20% of NFIP claims and receive one-third of disaster assistance for flooding. Flood insurance isn’t federally required in moderate-to-low areas, but it is recommended for all property owners and renters.”

While it may not be required for you, flood insurance may be purchased if you so desire. You’re eligible to purchase flood insurance as long as your community participates in the National Flood Insurance Program. Flood Smart provides a tool into which you which you enter your address to have your home’s particular flood risk assessed. Following your assessment you’ll find a listing of local insurance agents from whom you can gather quotes, comparing rates and coverage before purchasing flood insurance.

Flood insurance is available to you whether you own or rent a home or condominium. Costs vary depending on how much insurance is purchased, what it covers and the property’s flood risk.

Consider these coverage limits:

  • one to four family structure – $250,000
  • one to four family home contents – $100,000
  • other residential structures $250,000
  • renter contents $100,000

Be aware that it takes 30 days after purchase for a policy to take effect, so it’s important to buy insurance before the floodwaters start to rise.

If you’re wondering if flood insurance is something you should consider, here are some facts culled from Flood Smart to help you determine whether it’s a wise investment to protect your home and personal property:

  • A flood is defined as “a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow.”
  • Hurricanes, winter storms and snow melt are common (but often overlooked) causes of flooding.
  • New land development can increase flood risk, especially if the construction changes natural runoff paths.
  • Just a few inches of water from a flood can cause tens of thousands of dollars in damage. Over the past 5 years, the average paid flood insurance claim was nearly $34,000.
  • Over 5.5 million people currently hold flood insurance policies in more than 21,000 communities across the U.S.
  • Federal disaster assistance is usually a loan that must be paid back with interest. For a $50,000 loan at 4% interest, your monthly payment would be around $240 a month ($2,880 a year) for 30 years. Compare that to a $100,000 flood insurance premium, which is about $400 a year ($33 a month).

It’s a fact that unwanted water can and does wreak havoc with homes and possessions. This information will help you decide whether flood insurance is a wise expense for your circumstances.

Have you purchased voluntary flood insurance? Have you had occasion to file a claim?

Bonus Tip:

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