Flood insurance

Do you need flood insurance? Well, walk to the nearest mirror and ask the person you see if he or she owns much property that could be damaged or destroyed by water. If the answer is yes, then you should seriously consider buying flood insurance. Most persons who need the protection buy coverage offered by the National Flood Insurance Program (NFIP). If your community doesn't participate in the program, you'll have to look into coverage from private insurance companies.

What is the NFIP?

The National Flood Insurance Program.  The NFIP is a federal insurance underwriting program that enables property owners in participating communities to purchase inexpensive insurance protection against losses from flooding.

The insurance is designed to provide an insurance alternative to disaster assistance to meet the escalating costs of repairing damage to buildings and their contents caused by floods.

What's the likelihood of suffering a flood loss?

The chances of your business, home, or personal property being damaged by a flood depends primarily upon where you live. They also depend on other factors such as:

  • How much of a flood warning you receive
  • The level of flood precautions you take (such as moving personal property from lower levels to higher levels)
  • The precautions taken by your community (such as the use of flood controls in construction standards or sandbagging threatened areas). Since floods are related to weather conditions and tend to affect very wide areas, your chances of a flood loss may be higher than a loss from fires or windstorms. Many people have the obsolete belief that flood insurance is only needed if you live in a flood prone area

 Why does my Mortgage lender require me to purchase flood insurance?

Under federal law, the purchase of flood insurance is mandatory for all federal or federally related financial assistance for the acquisition and/or construction of buildings in high-risk flood areas, or Specail Flood Hazard Areas (SFHA).

The amount of flood insurance coverage required by the Flood Disaster Protection Axt of 1973, as amended by the National Flood Insurance Reform Act of 1994, is the lesser of the following:

  • The Maximum amount of NFIP coverage available for the particular property type
  • The outstanding principal balance of the loan
  • The insurable value of the structure

If the property is not in a high-risk area, but instead in a low-to-moderate risk area, federal law does not require flood insurance.  Historically speaking, about one-in-four flood claims come from areas in low-risk areas outside of SFHAs.

What is a 100 year Flood Zone?

The term "100 year flood" is misleading.  It is not a flood that will occur once every 100 years.  Rather, it is the flood elevation that has a 1 percent change of being equaled or exceeded each year. Thus, a 100 year flood could occur more than once in a relatively short period of time.

A 100 year flood, which is the standard used by most federal and state agencies, is used by the NFIP as the standard for floodplain management and to determine the need for flood insurance.  A structure located within a SFHA shown on a NFIP map has a 26 percent chance of suffering flood damage during the term of a 30 year mortgage.

Does my home-owners policy cover flooding?

No.  Flood damage is not typically covered by a home-owners insurance policy.  You need a specific policy to cover flood damage.

Can I get flood insurance if I'm renting a property?

If you live in a community that participates in the NFIP, you can get flood insurance to cover the contents of your home or business.

What is a flood zone?

If you have ever heard the term “flood zone,” you may think that it refers to locations that are particularly vulnerable to flooding. Wherever you live in the USA, you live in a flood zone. While your area may have a lower chance of flooding than a coastal area or a location situated near a body of water, your area could still experience flooding. A very dry part of the country can be susceptible to flash floods; hilly locations may be harmed by drainage; snowy locations may suffer from heavy snow thaw; other areas may suffer deluges or flooding due to a heavy rain season which has soaked the surrounding soil. So, if you've insured yourself against fire, wind, and other causes of loss, it certainly makes sense to also protect yourself from the potential of a flood loss.

Why worry when disaster coverage is available?

You may believe that even if you suffer from a flood, your loss may be taken care of when the government declares your location to be a disaster area. However, you're still taking a couple of large risks. First, your flooded locale may not be deemed a disaster area. Second, being designated as a disaster area is not a bargain. Disaster area status only gives citizens access to government disaster loans. If you qualify for assistance, you have replaced insurance protection with an obligation to pay off a large, long-term loan. Is it worthwhile to gamble on an opportunity to pick up more debt? You'll find flood insurance to be a cheaper and much more valuable alternative.

Don't be “all wet”

You don't have to leave yourself unprotected. We can help you with detailed information on the National Flood Insurance Program. You can also ask for help in getting the coverage you need to “keep dry” and secure in the face of a flood.