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Do I Need Flood Insurance?


Do I Need Flood Insurance?


No home or property is totally safe from potential flooding. Did you know that just an inch of water can cost you thousands in damage? Yeah, you heard that right.


Now, having flood insurance can make the difference between financial devastation and recovery. With climate change and all, the weather has been getting pretty tricky of late. Over the past few years, hurricanes have caused flooding that's above average.


The expectation is that this is going to continue. Some say it's going to get worse, which is not a surprising sentiment at this point. You can protect your home or property from water damage with flood insurance.



What Is Flood Insurance?


Flood insurance refers to a specific type of insurance coverage that protects you from property loss due to flooding. The flooding may be caused by prolonged and heavy rainfall, storm surges, melting snow, dam failures, or faulty storm drainage systems.


Insurers will use several factors to determine the risk factors for properties. These factors include topographical maps that show floodplains and lowlands as well as floodways susceptible to flooding.


Flood insurance is available for both commercial and residential properties. In many places, flooding is considered a vis major event (basically Latin for "superior force," in case you're wondering).


Flood coverage is a type of catastrophe insurance, and it's different from the basic hazard coverage your homeowner's insurance policy contains. Your standard homeowner's insurance provides coverage for things like interior water damage caused by burst pipes and things like that. These policies generally don't cover damage or destruction caused by floodwaters.


If you live in an area that's prone to natural disasters of this sort, then you'll need a special type of coverage. And that's flood insurance. Basically, it works like other insurance products. You pay an annual premium based on the flood risk of your property and the deductible you choose.


If your property and belonging get destroyed or damaged by flooding (due to external events, though, like rain, storms, snow, failed infrastructure), you'll receive compensation for the amount needed to repair or rebuild the damage. This is up to the limit of your policy. Note that there are two types of flood insurance. One is available through FEMA (NFIP). The other is issued by private insurers.



The Case of Basements


It's worth noting that flooding coverage is limited when it comes to basements. Flood insurance doesn't cover basement improvements or items that you don't need to make your property functional, safe, and sanitary. These items can include carpeting, drywalls, paint, finished walls, ceilings, floors, furniture, or personal belonging that you keep in your basement.


NFIP provides limited coverage for living spaces, like basements and crawlspaces, where the floor is below ground level. Also, you won't be covered if groundwater leaks into your basement because of poor drainage or cracks in your foundation.


By maintaining the utilities on your property regularly, you can avoid having to file a flooding insurance claim. You can inspect your utilities and appliances, locate your emergency shut-off valve and drain your outdoor faucets to avoid emergency situations.


It's vital that you understand what your flood insurance policy covers and what it doesn't. Enlisting the services of an insurance agent can help you get the flooding coverage you need.


Do I Need Flood Insurance?


According to FEMA, floods are the top natural disasters in the US. While certain areas are prone to frequent flooding, it can occur anywhere at any time. You just never know.


Even if your community has never flooded before, there's still a chance that it might happen. Poor drainage systems, melting snow, summer storms, a broken water main, and local construction can all cause flooding. If you don't want to take your chances and seek to protect your home and property against loss and damage, home insurance is a good option.


Take this interesting fact, for instance. Did you know that between 2014 and 2018, policyholders outside high-risk areas filed more than 40% of all NFIP flood insurance claims? So, you should think twice before you choose to forego flood insurance.


If your property is located in a high flood risk area and you took a mortgage from a lender regulated or insured by the federal government, your lender with need you to have flood insurance. They are legally mandated to require this.


Usually, this is not the case if your property falls in a low to moderate risk area. Nonetheless, your lender may require you to have flood insurance at any time. This is regardless of whether the firm is legally mandated to do so.


You may be renting property and feel like you don't need flood insurance. Granted, it is likely that the proper owner has flood insurance covering the property but not its contents. Content-only flood insurance is affordable and may help protect you against item damage or loss in the event of a flood.



Why is Flood Insurance so Expensive?


Compared to other types of coverage, flood insurance is quite expensive (especially the type available through NFIP). The short version of the story is that when the NFIP was launched back in the 60s, it wasn't meant to be a long-term solution. The program currently sits at enormous amounts of debt.


NFIP can't pick the properties to cover. Many policyholders that haven't flooded are subsidizing properties with repeated flooding events. This pushes the premiums up every year.


Private flood insurance policies are less expensive than the NFIP policies. This is because underwriting guidelines differ from those of NFIP. They don't accept all kinds of risks and are more stringent in risk assessment. As a result, the risk pool is thinned out, allowing for relatively lower premiums. Note that if your home is situated in a flood-prone area, your premiums are going to be higher than those of people living in low-risk areas. Flood zone happens to be the biggest factor that determines your rates.



How Can I Save Money on Flood Insurance?


You have options to reduce your flood coverage cost whether you take private insurance or the NFIP. The first option is obviously looking into private flood insurance if you reside in an area offering it. Private flood insurance is cheaper than NFIP.


You can purchase this insurance through your home insurer. You can lower your premium by increasing your deductibles. Note that some non-admitted insurance firms offer attractive options providing more coverage than the standard policies.


If your home has been added to a high-risk zone only recently, some private flood insurance firms may offer lower rates. This is especially if the area hasn't had major flooding history.


Both NFIP and private insurance coverage can reward you if you make adjustments to your property that are flood-conscious. The adjustments may add discounts or reduce your insurance costs for both plans. Below are some property adjustments you can make:


Elevating home utilities such as equipment or machinery like plumbing and air conditioners above base flood elevation.


Reviewing flood openings in your property to ensure they meet the latest building code guidelines/standards.


Considering your property for wet or dry flood proofing.


Relocating or elevating the entire property (may not be feasible for everyone, of course).


Flooding can happen at any time, even for those in low-risk areas. You can save money by being proactive about lowering your flood risk through special coverage. With private flood insurance, you can mitigate flood damage, temporary relocation, repair costs, and loss of personal items.


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