Flood Insurance – When it comes to Mother Nature, which can be merciless and unpredictable, it is always prudent to err on the side of caution. After all, a few inches of water can wreak havoc on properties.
A few feet of flood water is capable of carrying away a vehicle, and a typical flash flood can slam 10 to 20 feet of water along its path. Floods, which do not discriminate between deserts, rivers, mountains, coasts, small towns and big cities, constitute the leading natural hazard in the 50 states.
While there are three classifications of flood zones- low-risk, medium risk, and high risk, no home or business is immune from this natural disaster. In fact, the chance of a flood damaging a home as compared to a fire, during a 30-year mortgage period, stands at 26% compared to 9%, respectively.
Between 1978 and 2007, the National Flood Insurance Program (NFIP) settled more than $33 billion worth of flood insurance claims. Today, more than 5.5 million Americans safeguard against this potentially-devastating element by taking out the supplemental form of home insurance known as flood insurance.
Not only are they protecting their most precious investment- their home- but also averting a financial disaster and ensuring a personal sense of security for themselves and their families.
Standard home insurance coverage does not encompass flood damage. Fire insurance and flood insurance are typically purchased separate and apart from homeowners insurance policies.
Applicants qualify for flood insurance if their communities take part in the National Flood Insurance Program. Flood insurance is attractively-priced and easy to obtain, and it offers numerous benefits to policyholders:
1. Full reimbursement for all covered losses to property resulting from flooding;
2. Payment of flood damage claims even when the event is not declared a federal disaster;
3. Expeditious processing of the claim enabling the insured to recover faster; and
4. Opportunity to demand immediate partial payment following occurrence of the flood.
Flood insurance typically covers damages brought on by such events as overflowing water over dry land, tidal waves, and storm surges.
The average flood policy covers (1) clean-up of flood debris, (2) damage to structures, (3) air conditioner, water heater, and furnace, and (4) floor surfaces such as tile and carpeting. While the majority of home insurance covers hail and wind damage, flood insurance policies specifically exclude them.
Homeowners may also purchase flood insurance to protect their belongings, such as paintings, jewelry, clothes, furniture, and collectibles. There are three types of flood insurance policies:
1. General property, which covers apartments and non-residential buildings (i.e. businesses, churches, schools);
2. Dwellings, which includes residential condo units (i.e. condos with up to four families, single-family homes, etc..) and residential structures and/or belongings therein; and
3. Condominium associations.
Federal law requires individuals with federally-financed mortgages and with a home in a high-risk flood zone to buy flood insurance. As for homeowners residing in low-to-moderate flood zones, they should consider applying for flood insurance, in light of the fact that nearly 25% of claims originate from areas that are not high-risk.
Individuals who received federal grants due to past flood losses are also required to buy flood insurance to be eligible for future assistance.
Prospective policyholders may assess their flood risk level online by entering their address. They may also access internet listings of flood insurance agents in their area and links to pertinent resources.
Flood insurance may be purchased from a property and casualty insurance agent or a licensed private insurance carrier in the consumer’s state. Prospective buyers may obtain a referral by contacting the NFIP. The standard flood insurance policy, which has a one-year term, contains the following coverage limits:
Homeowners may have their home protected up to $250,000 and their personal effects up to $100,000;
Renters and businesses may insure their contents up to $100,000; and
Non-residential property owners may receive coverage for their building and belongings up to $500,000.
A flood policy may be purchased anytime but generally goes into effect 30 days after the insurance is purchased. There are, however, exceptions to the 30-day waiting period. For instance, the rule is inapplicable where a purchaser seeks additional insurance when renewing his or her policy.
Affordable flood insurance for both buildings and belongings is widely available, and individuals who reside in moderate-to-low-risk flood zones qualify for the Preferred Risk Policy.
This inexpensive option provides protection for residential and non-residential properties for as little as $112/year for building and belongings coverage and as low as $39 annually for contents coverage.
Numerous criteria are taken into account when calculating the flood insurance premium. Factors include the 1) property’s location, 2) flood zone classification, 3) building’s occupancy, 4) structure’s date of construction, 5) presence of a basement, 6) building’s age and design, 7) size of the deductible, and 8) structure’s replacement cost.
Consumers may avail themselves of online premium estimate forms and tables. Premiums may be paid by credit card, cash, money order, check, or through an escrow account at the mortgage company’s discretion.