Your lender may require you to purchase flood insurance if you have a home mortgage and live in high-risk flood zones. If you live in a low- or moderate-risk area and your community is covered by the National Flood Insurance Program like most of them are, you can purchase it.
If you fall into the latter group, your first question is likely to be about costs. Federal flood insurance can cost as little as a few hundred dollars per year or as high as $10,000, depending on what risk factors you have. Here are some other facts to help you make a decision on whether or not you should purchase flood insurance.
Flood Damage Isn’t Covered By Your Homeowners Insurance
Your homeowners insurance policy only covers damage caused by water from the sky. It does not cover water that touches the ground and enters your home which is what flood insurance covers.
For example, your homeowners insurance would cover you if a tree limb puts a hole in your roof from a storm and rainwater damages your ceiling or floor. Flood insurance is only available if the creek in your area overflows into your home.
Flood Zones Are Everywhere…Literally!
Every area is considered a flood zone; It’s simply a matter of how high the risk of flooding is. The NFIP will tell you the exact level of flood risk in your home. Zones A and V are considered high-risk areas. Zones B, C, and Z are moderate-to-low-risk areas. Zone D is an area where the flood risk is uncertain due to the fact that this zone hasn’t been mapped yet. These zones help to determine your policy rate.
Moderate-to-Low Flood Zones Have Made a Large Chunk of the Insurance Claims
More than twenty percent of insurance claims have been made from homeowners that live in zones B, C, and Z. Despite only 18% of homeowners having flood insurance, no one knows how many don’t have the flood insurance they need.
Obtaining Government Aid is Difficult
Most government aid is in the form of loans that you will need to repay. To be eligible for a loan your area must first be declared a federal disaster zone. Federal disaster assistance is only available in areas that have experienced less than half the flooding events.
Flood Claims Are Averaged at $30,000 or Higher
Your flood claim could be much greater than the average if your home is in an area where water rises to the point that emergency workers have to make roof holes to rescue residents. On top of the flood damage, your expenses will now include the roofing problems that need fixed.
Floodwater can cause lots of damages to your home, even if it is only six inches high. Due to flood damage, you could be spending thousands on new floors, new door frames, new windows, electrical work, plumbing work, and so much more.
Conclusion
You can create a home inventory to determine how much coverage you will need and then make an estimate of the cost of rebuilding your home or going through a home renovation. These two numbers together are your potential loss from flood damage. Federal flood insurance would cover up to $250,000 in rebuilding costs and an NFIP can cover possessions up to $100,000. To insure your home’s value above $250,000.00, you will need to purchase a private flood insurance policy. Do some research and contact a local insurance agent to discuss the options.