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Understanding Flood Insurance: Do You Need It?

 

 

 

Flood Water

What comes to mind when you think of flood insurance? For some, the idea of having flood insurance equates to an added expense, which could lead them to question whether they really need it. Here is some information about flood insurance to help you decide whether it is necessary for you to have. 
 

Floods Are Common

In the U.S., floods remain the topmost natural disaster, according to the Federal Emergency Management Agency (FEMA). Water can come from continuous heavy rains, spring thaws, and hurricanes. Even a few inches of water can cause significant damage to your home. While some areas are more prone to flooding, it can happen anywhere. If you live in a high-risk area, it will be wiser to have flood insurance. 
 

Lender’s Requirements

Some lenders will require you to have flood insurance. A standard homeowner’s insurance policy will typically not cover flooding due to external natural causes. Some lenders will require you to secure this insurance if you are taking out a loan from a federally regulated lender such as an FHA mortgage or when you are buying a home in a Special Flood Hazard Area. This means you have to renew your flood insurance every year until you pay off your mortgage. It often serves as their protection should the borrower abandon the home and stop making payments due to flood. 
 

Homeowner’s Insurance

In case you don’t know yet, your standard homeowner’s insurance policy does not include flood damage, and since floods can happen anywhere, it becomes necessary to secure a separate one. Typically, homeowners can obtain flood insurance through the National Flood Insurance Program (NFIP), under FEMA, or you can also get it from private insurers like Yep Insurance
 

Flood Insurance Coverage

According to FEMA, flood insurance coverage often includes the following: 
  • The building and its foundation
  • All electrical and plumbing systems
  • Water heaters, furnaces, and other central air conditioning equipment
  • Built-in appliances, refrigerators, cooking stoves, and dishwashers. 
  • Permanent carpeting laid over unfinished flooring
  • Permanent panelling and wallboard
  • Built-in cabinets and bookcases
  • Window blinds
  • Detached garages (often up to 10% of building property coverage)
  • Debris removal


​Who Is Required to Secure Flood Insurance?

In general, properties located in high-risk areas will be required to secure flood insurance. You can check out the FloodSmart.gov website or the FEMA map to see if your property is included. However, the final say will depend on the flood insurance rate map and flood zone hazard determination. At best, you should ask your lender if they have any flood insurance requirements to be on the safe side. 
 

The Cost of Flood Insurance

How much you should pay for your flood insurance depends on a number of factors. The most important of all is your property’s risk for flooding, accompanied by the age of your property and the number of floors and the coverage required by the lender. 
 
The price also varies depending on what it covers and how much coverage you would like to obtain. According to FloodSmart.gov, homeowners can buy flood insurance coverage amounting to $250,000 for the home’s structure. An additional $100,000 for belongings is also possible. You have to understand that the price will remain the same across insurers since the government regulates it. 
 
When it comes to flood insurance, it is always best to err on the side of caution. Since the price will not vary per insurer, it is best to choose your provider based on their reliability and convenience when it comes to claims. Pro-tip: It will also help if you can engage in tree planting activities to help address our pressing flood problems. 
 
 

 

 

 

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