It seems you often hear about flooding in different parts of the country. When you hear about flood damage, your mind may first go to flood insurance. You may think that hopefully the poor people affected had it.
What would happen if your home was damaged by a flood? Would you be covered? Do you even understand what is required to be covered for this type of damage? Most people cannot answer all these questions because they do not completely understand flood coverage and the way this type of insurance works.
What Protection Does It Offer?
Typical home or rental insurance policies do not include flood coverage. Flood insurance is a completely separate policy. It covers damage caused by water that comes from rising bodies of water. This is not the same as a flood caused by a broken pipe or overflowing bathtub. This is a natural disaster type of coverage.
Why Do I Need It?
Many people think they do not need this type of insurance because it is not offered as part of a homeowner’s policy. This is a mistake. It is offered separately because some areas may never have flooding and homeowners do not like to pay for insurance they do not need. It is not offered this way because it is not needed. The reality is that almost every area can and will experience flooding at one point. It is actually the single most common natural disaster in the country. So, not having coverage is a huge risk.
Looking at some numbers, flooding is very costly. An inch of water in your home can lead to about $20,000 in damage. An inch is not much. Imagine if your home was filled with a few feet of water. The costs would add up fast. Not only would you need to replace flooring, wall materials and belongings but also you would get into having to replace electrical and possibly other systems. Water can also cause lasting issues, such as mold and rot, that cost a lot of money to fix.
If you live in an area at a high risk for flooding and you do experience a flood, the federal government offers assistance from FEMA. However, if after the first instance of flooding, you do not get and maintain insurance, you will no longer be able to get benefits from FEMA or any other government agency if a future flood occurs.
Having this coverage is a smart idea if there is even a chance your home could be a victim of flooding. It provides you with security that should the worst happen, you will not face financial ruin because of it. Trying to rebound from a flood without proper insurance coverage can be difficult if not impossible for most people.
Where Is It Available?
The most important thing to understand about this type of insurance is that it is not available to everyone. It is considered a special insurance and is only available to those located in specific areas that participate in the National Flood Insurance Program. Generally, these are areas that are prone to flooding. If you live outside of the NFIP areas, you cannot get this type of coverage, even if you feel you are at risk for flood damage.
Where it is available, you can get it to cover any type of property. This includes rentals, residential buildings and commercial properties. Almost any type of property can be covered.
Some areas are mandated by federal law to offer insurance. You may also be required by federal law to purchase it. Congress has created a requirement for some lenders to ensure homeowners have this insurance if the property is located in a high-risk area. In some cases, lenders take it upon themselves to require homeowners to have this coverage if it is available.
If you get this type of insurance, you will be required to purchase is as a separate policy from your renter’s or homeowner’s insurance policy. Remember it is offered through NFIP, so it is completely different than other insurance coverage options.
How Much Does It Cost?
Cost is always a concern when it comes to insurance of any type. After all, its very nature is that it is something you may pay on for years and never actually use, so you do not want to spend more than you have to on it. As with homeowner’s insurance, flood insurance rates are made up depending on your home’s value and the coverage you get for the contents or your personal belongings.
Cost is also highly related to where you live. If your home is located in a high-risk area, you will pay more than if it was in a lower risk area.
Most companies also offer discounts just as with other types of insurance. Always check into any possible savings when you are setting up your policy so you can get the best possible rate.
How Much Flood Insurance Do I Need?
You can get up to $500,000 in coverage, but the majority of people probably will not need that much. The best way to figure out how much you need is to look at your homeowner’s policy. Getting the same coverage is usually a good choice because you are covering the same things with both policies. Something damaged by fire or flood is still damaged and needs replaced. The cost won’t really depend on what type of damage was done as much as it depends on how much the item damaged costs to replace.
You may only be required to have a certain type of coverage by your lender, but you should carefully consider your options before just going with the minimum they require. Lenders often only require building coverage, which is the cost of rebuilding the dwelling based on its current valuation. You have the option of actual cash value, which is often higher than building costs and may be a better choice.
You also need to think about your personal property. You may lose everything in a flood, so your insurance needs to offer adequate coverage to replace everything you lose. The best way to figure this out is through doing an inventory of your household items.
Flood insurance is very different from other insurance you may get. There are specific details you have to consider when buying it. You may be required to buy it or not even eligible to buy it. It can be confusing. However, once you learn a bit more about it, it becomes clear why it is important to have it.
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