Floods are prevalent in the U.S. To protect your assets from the risk of flood damage, you should think about buying flood insurance policy. The following is what you need to know about flood insurance policy.
How Does Flood Insurance Work?
Many people purchase flood insurance through the National Flood Insurance Program (NFIP). This is a government program operating under the Federal Emergency Management Agency (FEMA) that provides subsidies for flood insurance policies.
In some places, flood insurance is voluntary. For example, if you live in an area that’s highly susceptible to flooding and your mortgage is sponsored by the federal government, your lender will require you to purchase a flood insurance policy.
Does Homeowners Insurance Cover Floods?
Homeowners insurance is an essential policy because it provides protection against several home-related risks, including plumbing-related flood damage. However, this policy doesn’t cover losses arising from natural floods. Since flooding can affect an entire region, many private insurers cannot withstand the financial burden of paying out claims on a large scale.
Therefore, even if you have homeowners’ insurance, you may have to take flood insurance if:
· You live in a flood-prone area, and your mortgage is backed by the government.
· You live in a high-risk flood area. One way to determine your flood risk is by referring to FEMA’s mapping tool.
· You cannot afford to pay for flood damage repairs. If you don’t live in a flood-prone area, you may still face the risk of flood damage. If you cannot bear the cost of repairing your home or replacing belongings after a flood, you should think about purchasing a flood insurance policy.
What Does Flood Insurance Cover?
NFIP flood insurance policies offer two coverages: dwelling and contents coverage. Dwelling is a mandatory policy, and you cannot waive it. It provides financial protection against the damage flooding can cause to your home's structure, appliances in your home, and any structures attached to your home.
On the other hand, contents coverage caters for your belongings, including furniture, home décor, and clothing. This coverage is optional and runs up to your policy limits. You can opt to purchase a flood policy without the contents coverage.
With private insurance companies, you can purchase different coverages than what is possible with the NFIP. This is because the government does not support these companies; therefore, they offer more flexibility. While NFIP takes all applicants living in communities who are part of the NFIP, private insurers choose who they want to sell to. Private personal flood insurance is suited for people with large properties or those not satisfied by FEMA options. To get the best deal from a private insurer, solicit quotes from different carriers.
What Isn’t Covered by Flood Insurance?
Flood insurance does not cover the following:
· Patios, decks, and fences
· Precious metals, stock certificates, and currencies
· Septic tanks and swimming pools
· Cars and other vehicles
· Personal property stored in crawl spaces or the basement
· Additional living expenses
How Can You Lower the Cost of Flood Insurance?
On average, the cost of flood insurance in the U.S. is $700 per year. Some factors that determine the cost of flood insurance include flood risk, home age and construction, coverage limit and deductible, type of policy, and the insurance company.
To lower the cost of flood insurance, start by elevating your utilities and property. This makes them less vulnerable to the risk of flood damage. Another way to lower your premiums is to add flood openings below the lowest elevated floors of your property. The openings drain water out of your home, thus reducing the level of damage that could arise after a flood. Lastly, increasing your deductibles will lower your premium. This is because you agree to pay more in case of a claim, which reduces the risk to the insurer.
Homeowners insurance is an excellent policy for protecting your home against various risks; however, you should take it alongside flood insurance if you live in a flood-prone area. Before making any final decisions, determine the risk of flooding in your area and your specific needs. Also, compare the rates of different private insurers and match that with what the federal government policy offers. This will ensure you make an informed and appropriate choice.