Last Updated on May 20, 2021 by MoneyVisual
Have you heard about flood insurance? If you have, you might be wondering whether you need it. To help you decide whether flood insurance is important for you or not, it’s crucial to understand this insurance and its purpose.
Floods are some of the common natural calamities in the USA, as per the Federal Emergency Management Agency (FEMA). Even a small amount of water may cause expensive damage to your property, according to FEMA.
There are so many conditions that cause floods, such as heavy rains, spring thaws, hurricanes, and accumulation of rain after a wildfire. Although certain areas are prone to floods, it may occur anywhere. Therefore, you need to know why to purchase a home and flood insurance.
Here are certain important things to know to determine if you need a flood insurance policy.
Standard Home Insurance Policy won’t Cover Flood Damage
You must understand that your standard home insurance policy does not cover any flood damage. This is because floods may occur anytime, anywhere. Therefore, you need to purchase a different flood insurance policy. This insurance is issued through NFIP (National Flood Insurance Program), which is managed by FEMA and also sold by certain private insurers.
What’s the Cost of Flood Insurance?
The cost of flood insurance depends on various factors, such as what policy covers, property’s flood risk, and how much coverage is purchased. You may buy separate coverage (usually up to $250,000) based on the structure of a home and your belongings. The limits you set and the type of coverage you choose also determine the cost of your insurance policy.
When you Need Flood Insurance?
If your house is situated in a high-risk, flood-prone area and you have a mortgage or insured lender, your lender will legally mandate you to buy home insurance for flood areas. Generally, this is not the case if your home is in moderate or low-risk areas. But if you live in a high-risk area, it’s mandatory for sure.
For obtaining NFIP flood insurance, even your community must participate in the program. You may check online whether your community is listed in the NFIP Community Status Book.
Although flood insurance is provided via NFIP, flood insurance policies are administered and sold by private insurance firms. Many policies don’t take effect for up to 30 days of signing. So, it’s a good idea to buy coverage before there is a risk of flood in your area.
Is your Home at Risk of Flooding?
Flood risk depends on which area of the country you live in. There are some amazing apps like Google Maps that help you determined whether your house lies within flood-prone zones. Many localities also provide information about specific flood areas. So, it’s better to consult your local agents about this information.
Flood Insurance Zones
There are three main types of flood insurance zones, such as:
- High-Risk Flood Prone Areas: If your property lies in high-risk areas of floods and you hold a residential or commercial mortgage from a federally licensed issuer. High-risk areas are defined as places with a higher chance of flooding every year.
- Moderate to Low-Risk Flood Prone Areas: These flood-prone areas have 0.2 to 1% of the risk. These areas cover more ground and are still responsible to be affected by more than 20% by NFIPs flood claims.
- Undetermined-Risk Areas: These areas generally are not immune to flooding and often marked with “D” on the flood risk map. While the NFIP does not explicitly require or recommend flood insurance in such areas, it does suggest insuring properties within these areas.
What Flood Insurance Cover Does?
Having flood insurance means to protect your home if water overflows, heavy rain seeps within the basement. Due to water penetration, the soil around the house also becomes muddy and retains water that qualifies your home for flood insurance.
It is the only insurance that covers flood damage. Any other policy that protects your property from water damage won’t apply for this type of natural calamities. After determining whether your home lies in flood-prone areas and at what level of risk zone, you may consult a flood insurance provider to help you get the best policy.