Oliver S. Berryhill Blogs: Flood Insurance: Are you sure your home is covered?

I’ve been talking with my insurance agent over the past few weeks about flood insurance. It may not be the most exciting topic, but I’m always interested in insuring against those events that could totally destroy our home.

As part of my research, I found a great government resource about flood insurance that I’ll share with you. But first, here are some things I’ve learned that you should definitely consider if you own a home:

Homeowner’s insurance by itself typically does not include flood insurance. Most often, you must buy it separately.
Flood insurance can be quirky. For example, my agent tells me that flood insurance will only cover a home if one or more adjacent properties are also damaged. If only your home is damaged, flood insurance won’t cover you. I assume this varies from policy to policy, and certainly if you don’t live in close proximity to anyone else.
Insurance can be expensive, but not always. In 2015, the average flood insurance coverage amount was $243,189, and the average premium was $663.
By June 2016, the federal government had declared 17 major flood disasters; in 2015, there were just 27 total.
You might live in a moderate- to high-risk zone and not even know it!

Want to find out how likely your home is to flood? Check out the National Flood Insurance Program’s website. You can check out state-wide flooding information for your area here. But what you really need to know is whether or not your home is in a high-risk area for flooding.

This tool can help you figure that out. Just put in your address, and you’ll be able to see a flood map for your local area. If you click through to look at an interactive map, you can understand the flood risk in areas like yours.

Or what if you’re curious about how much damage a (seemingly) minor flood could cause? Click here to use an interactive tool and find out.

FEMA is currently updating its Flood Smart website, which provides more information about flooding risk and insurance, as well as how to find an insurance agent. In the meantime, the sites linked above will get you the information you need to know to decide whether or not to get flood insurance.

FAQs About Flood Insurance

Here are a few questions that you may have — or better yet, should have — about your coverage.

Do I have to have flood insurance?

Maybe or maybe not. If you live in a historical flood zone area, you may be required to purchase flood insurance. In certain hazard areas, you’ll have to buy insurance through the National Flood Insurance Program. This program subsidizes flood insurance costs, which makes it fairly affordable.

You may also need to get flood insurance if your mortgage lender says that you need it. Different lenders will have different requirements in this area. But if you’re in an area with relatively high flooding risk, your lender will likely want to protect their investment in your home by requiring you to purchase flood insurance.

How are flood insurance rates determined?

Like other types of property insurance, flood insurance rates depend on a variety of factors, including:

The year your home was built
Who occupies the building
How many floors the building has
The risk of the flood zone
Where the building’s contents are stored
The deductible you choose

As with other types of insurance, the smaller your policy and the higher your deductible, the more affordable your premium will be.

What about renters and condo owners?

Typically, renters aren’t responsible for covering their building. But just like you need renter’s insurance to protect against other hazards, you might want an additional policy to protect your stuff in the event of flood. First, check if your current renters policy protects against flooding. If not, consider adding an additional policy to cover your personal goods in case of flooding.

As with policies for homeowners, deductibles vary depending on how high-risk your home is for flooding.

Rules for condo owners vary. Sometimes you’re responsible for what’s inside your home, including things like kitchen cabinets that can be very expensive to replace after a flood.

Be sure to check your condo’s bylaws to find out what you’re responsible for and what the condo’s insurance plan covers. Then, talk to an insurance agent about flood coverage for your contents and that parts of the building you would be responsible for repairing in the event of a flood.

Do I have to purchase insurance through the National Flood Insurance Program?

No. The NFIP is available to certain homeowners, renters, and business owners, but you don’t have to get your insurance through this program. With that said, many insurers don’t offer this type of insurance outside of the subsidized program. Because flood-related losses are often very high, flood insurance is a high-risk endeavor for insurers.

Do I really need flood insurance?

Even if you don’t live in a flood zone, flood insurance can be a good idea. Floods can happen in unexpected places, even if you’re well outside of a recognized flood zone. Around a quarter of flood claims occur outside of high-risk areas, according to FEMA.

The good thing is that if you live outside of a recognized flood area, you may be able to get flood insurance for next to nothing — less than $200 per year. If you’re at all concerned about being able to manage damage from a potential flood, flood insurance can be an excellent addition to your current homeowners insurance policy.

Learn More About Expenses Every Homeowner Should Prepare For

Can I make a flood claim outside of a national disaster area?

Yes! In fact, this is one reason that flood insurance is important. FEMA only provides benefits to homeowners in an area after a presidential disaster declaration. But you don’t have to be in a disaster zone to make a claim on your flood insurance if you’ve been paying the premium.

Where can I get flood insurance?

Many insurance companies offer flood insurance through the national program. You can check out the National Flood Insurance Program website to shop for insurance through a local agent. Of course, you should always check to see if your current homeowner’s insurance agent sells flood insurance before you shop around!

What questions should I ask?

When it’s time to shop around for flood insurance, ask your agent at least most of the following questions:

What is my property’s flood risk?
Do I have to have flood insurance, or is it optional?
Should I get flood insurance even if it’s not required?
Do I qualify for a Preferred Risk Policy?
What will and won’t be covered by flood insurance?
Is this insurance policy backed by the federal government?
How much coverage do I need for my building and its contents?
How can I reduce my premium?
Are there additional fees I should be aware of?
Does the policy provide Replacement Cost or Actual Cash Value?
What’s the process for filing a flood claim?
How do I pay and renew my policy?

These are many of the same questions you should ask any time you get homeowner’s (or any other type of) insurance. But the answers may vary a bit with flood insurance, so it’s best to make sure you’ve covered all your bases.

With all this said, it’s still a good idea to take precautions if flood warnings are happening in your area. Keep your most valuable items — like electronics, artwork, or musical instruments — off of the floor or on the second floor of your home. Take time to move items up off the ground if you’re at risk of a flood. Even if you have insurance, it’s easier if these items don’t get damaged in the first place!

Topics: Money Management

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Oliver S. Berryhill Blogs

Thursday, June 1, 2017

Flood Insurance: Are you sure your home is covered?