5 Flood Insurance Tips You Need to Know
Updated: Dec. 19, 2022According to the Federal Emergency Management Agency's website, flooding is the nation's most common and costly natural disaster, basic homeowners' or renters' insurance doesn't cover flooding, and more than 20% of flood claims come from properties outside of an area known for flooding. Homeowners everywhere purchase insurance to protect their property and valuables. But what about flood insurance? What is it, exactly and do you need it? What does it cover? And how much can it cost? Let's take a look at the answers to these questions.
According to the Federal Emergency Management Agency’s website, flooding is the nation’s most common and costly natural disaster. Basic homeowners’ or renters’ insurance doesn’t cover flooding, and more than 20% of flood claims come from properties outside of an area known for flooding.
What is Flood Insurance?
Flood insurance is specific insurance that covers damage to your property from flooding. It is provided by the federal government through the National Flood Insurance Program and is secured by private insurance agents, like the one who sold you your homeowners’ policy. Flood insurance is not for water damage from burst pipes or the washing machine overflowing. For that, your basic homeowners’ insurance will do.
Most folks assume that if their property is not low-lying or shoreline, they don’t need flood insurance. They’ll reference topographical maps looking for elevation risks and bodies of water but flooding is caused by many different factors. The rapid thawing of snow in spring, especially when accompanied by rain, can cause a flooding situation. Periods of heavy rain and hurricanes can, as well. And something few think of is that since wildfires change the landscape and soil conditions, flooding occurs when fires are followed by heavy rains. Interestingly, 20% of all flood claims come from flooded homes outside of high-risk areas, according to FEMA.
Do You Need Flood Insurance?
Now that you know what can cause flooding, and that it can occur almost anywhere, do you think you need it? If you live in a high-risk area, the answer is yes. In fact, the Flood Disaster Protection Act of 1973 and the Flood Insurance Reform Act of 1994 mandate that federally regulated mortgage lenders require the purchase of flood insurance on mortgaged properties in high-risk areas. And, some lenders require it even if you’re not in a high-risk area.
Many people don’t realize their standard homeowners’ insurance doesn’t cover flooding. Flood insurance is a separate policy. In fact, according to a 2013 survey conducted by Allstate Insurance, “44 percent of Americans said they believed they were covered for weather-related floods, when, in fact, only 15 percent reported having purchased a flood insurance policy through the NFIP.”
Have a conversation with your insurance agent. They can run you through an assessment that will help you decide if flood insurance is right for you.
According to FEMA, just one inch of water in your home can cause $25,000 in damages. Not to mention the heartache, health risks and loss of precious things. Surely, if you were one of the 20% of flood victims outside high-risk areas, you would wish you had insurance.
Do Renters Need Flood Insurance?
Not all water damage is the same. If a pipe burst in the wall of your apartment building and the water flooded into your space damaging your furniture, rugs, and personal possessions, the building owner’s insurance would cover you. And, in the rare event they didn’t, your renter’s policy would. However, if the water damage came from a hurricane, only a flood-specific policy would cover the damages. Like homeowners’ insurance, basic renters’ insurance doesn’t cover flooding.
You might think that you would be covered if the rental property owner carries coverage for flooding. But that coverage would only cover the owner’s property, not yours. If you rent, and you want to be compensated for loss or damage to your belongings in the case of flooding, secure your own policy.
How Much Does Flood Insurance Cost?
While the average cost of a flood insurance policy is $700 a year, your cost depends on many factors. How much coverage you want to buy, the value of your property, whether you want to cover just the structure or the contents as well, plus your risk factor are all variables an underwriter will take into account when assessing the cost of your policy.
FEMA’s Flood Map Service Center allows you to enter your address to determine the risk for flooding in your area. Your property will fall under one of three risk categories. They are Non-Special Flood Hazard Area (NFSA) which is moderate to low risk, Special Flood Hazard Area (SFHA) which is a high-risk area, and Undetermined, which means there have been no risk assessment studies done in that area. Of course, people in the SFHA category will pay more for insurance than those in the NFSA category.
Are There Ways to Prevent Flooding?
While none of us has the power to stop the rains from coming down or the flood waters from coming up, there are some things you can do to protect your property from a flood. You can install an in-ground drainage system to help water drain away from your home. It’s a relatively straightforward DIY project that will cost less than $1,000, but it will take some time, especially if you’re doing the digging by hand. Another option is to install drain pipes that flow into a creek bed or rain garden. Finally, you can keep your basement dry by installing a sump pump and basement drainage system.
