Do I Need Flood Insurance?
The National Flood Insurance Program (NFIP) defines flood as “a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow.” The purpose of this kind of insurance is to mitigate risk to property owners, renters, lenders, and insurers.
Flood insurance is different from other types of hazard insurance. In fact, no other kind of insurance covers flood damage. Even though it is regulated by the federal government, you must get the policy through a private insurance company or agent.
It is required for most homes and businesses in areas designated to be high-risk. It is not federally required for moderate-to-low risk areas. Rates lower than those for high-risk areas are available. According to the NFIP, 25% of claims are from areas with moderate-to-low risk.
Rates are set by the NFIP, so they are the same across all companies and agents. Property and contents policies can be purchased together or separately. Even if purchased together, there are separate deductible amounts for structures and contents. Be aware that your mortgage lender may be able to set the maximum deductible amount.
Along with the area’s level of risk, the policy rate will be determined by the age and construction type of insured structures, the number of floors, location of contents, along with other factors.
There is a waiting period before a flood policy goes into effect. Usually it is 30 days from the date of purchase. However, there are exceptions:
– The lender may require it as part of initiating or modifying a loan.
– The lender may determine that an existing loan without a flood policy now requires one.
– An additional insurance amount requirement resulting from a map revision.
– Additional insurance protection as part of a policy renewal.
As with any kind of hazard insurance, when an actual emergency occurs, a properly executed policy allows for partial and even full recovery of property damaged or destroyed by a flood. That and the sense of security resulting from its purchase are the primary benefits.