Do You Need Flood Insurance?

Anyone who has watched the news of a major hurricane or another intense storm has seen the aftermath of flooding. According to the Federal Emergency Management Agency (FEMA), flooding is the number-one natural disaster in the United States. So, how do I know if I need flood insurance over and above what my current homeowners policy covers?

Given flood’s #1 status, you might assume a lot of people have flood insurance—but that’s not the case. FEMA statistics from the National Flood Insurance Program show there are more than 5 million flood insurance policies in effect, nationwide. Just one inch of water in a one-story, 1,000 square-foot home can cost more than $10,000 in damages. FEMA has a cost-of-flooding tool to get a ballpark idea of what a little bit of water might mean for your home.

How to Be Sure You’re Insured Against Flooding
Just because you have a homeowners insurance or renters insurance policy doesn’t mean you’re covered for flood damage. Most policies don’t include flood coverage. Congress enacted the National Flood Insurance Program in 1968 as a way for homeowners to get that protection. If you’re considering flood insurance, it might also be a good time to consider your overall homeowners insurance needs. There are many factors to consider when deciding how to spend your insurance budget.

Do You Need Flood Insurance?
If you live in a known flood-risk zone, certainly, you need flood insurance. It’s likely a requirement to get flood insurance as a contingency of purchasing your home. But even if you don’t live in a high-risk. flood zone, flood insurance is still a good thing to consider; more than 20 percent of flood insurance claims are made by policy-owners who live outside of high-risk zones. In fact, 98 percent of the counties in the United States have been hit by flooding. FEMA has another handy tool that can show the history of flood risk and costs for your state.

Don’t Depend on Government Emergency Funds
The emergency relief funds you hear about aren’t simply a spigot of money that gets turned on when it floods. First of all, it requires a presidential declaration of disaster (flood insurance can be paid out without a declaration). And then there’s the money itself. It might come in the form of a loan that needs to repaid, or you might receive a FEMA disaster grant, which pays you about $5,000 on average. With the average flood insurance claim payout coming in at more than $40,000 (money that doesn’t have to be repaid) the wisdom of a flood insurance policy becomes fairly evident.

What Does Flood Insurance Cover?
FEMA’s National Flood Insurance Program (NFIP) comes in two types: coverage for your building and coverage for your building’s contents.

• Building Coverage: The maximum building coverage you can buy is $250,000 to cover such things as walls, floors, heating and cooling systems, large appliances and cabinets.
• Contents Coverage: The maximum contents coverage you can purchase is $100,000 to protect such things as clothing, furniture, small appliances and personal items.

Those are just a general overview of the coverage available to homeowners and renters. Higher levels of coverage are available for businesses. 

For instance, there will most likely be separate rules regarding both building and contents coverage for your basement. Policies can also differ in the way they treat personal property such as original artwork and items of particular personal significance. Also important is to understand what “flooding” means in the context of your policy; it doesn’t just mean “water in your house.” Flood insurance is intended to cover water damage that is the direct result of a flooding event. If your sewer line simply backs up into your home, for instance, that is not covered under flood insurance. Take a look at this coverage guide for more details

How to Buy Flood Insurance
 A good place to start to speak with an insurance professional at USA Mutual Insurance. NFIP insurance comes with an average premium is $700 per year, but the only way to know your actual costs (it can be much lower in low-risk areas) is to speak with an insurance professional about your individual needs.

NFIP is Not the Only Option
Most of the flood insurance in effect in the U.S. is NFIP insurance. But there are private policies available for people who don’t find NFIP an attractive option. For those who require a higher coverage level than NFIP offers, there is private insurance. There are advantages and disadvantages to going the private route. But possibly the most important disadvantage is private flood insurance is a fairly young market that has yet to stand the test of time against Mother Nature.

Flood insurance is one of those things people tend not to miss until they get caught without it. The world of homeowners and renters insurance is full of possibilities and it’s up to each of us to weigh our personal risks and make the best, most-informed decisions possible within our personal means.

If you have any questions regarding flood insurance or any other insurance questions, please click here to speak with one of our insurance professionals.