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After a brutal hurricane season that made headlines worldwide, concerned homeowners are asking questions: Doesn't my current insurance cover flooding? When is flood insurance required? Should I get flood insurance anyway? Is it expensive? What if I rent? Can I get coverage in the middle of a storm? Continue reading for the answers. Am I already covered?
According to FEMA, floods are not only this nation's "most common" natural disaster they're also the costliest. And no, your typical homeowner's or renter's insurance does not cover weather-related floods, so if you didn't specifically seek it out when you bought insurance, you probably aren't covered. Is it required?
If you live in a Special Hazard Flood Area and you're carrying a mortgage on your home, then you're required to have flood insurance. It goes along with your standard homeowner's insurance which you cover in your mortgage payment. However, even if you don't live in a high-risk area, it may be required.
Should I get flood insurance anyway?
If you live in a low or moderate-risk area, you can still get flood insurance. According to FEMA, over 20% of claims come from homeowners that live outside of a high-risk zone. After all, it isn't just coastal areas that experience flooding. During the span of a 30-year mortgage, you have a nine percent chance of making a fire-related claim but a 26% chance of making a flood-related claim.
How much does flood insurance cost?
Flood insurance premiums vary according to where you live, but the average homeowner pays about $700 per year. If you live in a low-risk area, your premiums may only be around $400, but it will cost a bit extra if you have a basement. Because the average flood claim is nearly $40,000, the cost of flood insurance may be worth it.
According to FEMA, you can't buy the National Flood Insurance Policy (NFIP) as an individual you must go through an insurance agent. But there's a good chance that the company you already have homeowner's insurance with also sells flood insurance. The NFIP policy covers your structure up to $250,000 and then your personal property up to $100,000.
Since the NFIP caps coverage at $250,000 you may want (or be required to by your lender) to buy a policy known as Excess Flood Insurance that will cover you for an additional amount. Consider that if a flood completely wiped out your home it might cost you more than $250,000 to replace it, and you'd need that extra coverage to ensure your financial well-being. Because the NFIP is considered your Primary policy you'd have to wait until that gets paid before you request payment from the Excess Flood policy. Also, there's no deductible on this policy because there is one on your Primary coverage.
Does coverage kick in right away?
Flood risk areas can change so even if your home wasn't considered at high risk when you first bought it you may want to check on your status now which you can get by visiting the Floodsmart website. There's also a 30 day waiting period on flood insurance coverage so you'll want to buy it well in advance of storm season.
Although you may feel safe from floods because of where you live, consider that one unusual and prolonged weather pattern could severely damage your home. In Colorado in 2013, floods caused more than $1 billion in property damage. In 2006 flooding in the Mid-Atlantic states was considered the worst flooding in that area since 1979. It may be worth it to at least discuss your risks with your insurance agent or mortgage professional.