Estimated reading time: 5 minutes
Return To: Flood Insurance – The Ultimate Guide
The average flood claim costs $39,000 for a U.S. homeowner, according to FEMA.
This level of damage can occur from as little as one inch of water.
You’ve probably heard of flood insurance, but unless you have been required to purchase it, chances are you don’t know much about it. You’ve probably never given much thought to the question, “Do I need flood insurance?”
There are lots of myths out there about flood insurance, one of them being that you have to live in a designated flood zone to purchase coverage. In fact, anyone can purchase flood insurance.
There’s a good chance that your homeowners or renters insurance policy specifically excludes losses caused by flooding. Flooding is unpredictable and can happen anywhere.
If your property is damaged by a flood and you don’t have insurance coverage, you could be on the hook for an average of almost $40,000.
If you are wondering if you need flood insurance, keep reading. We’ll take a closer look at what flood insurance covers and why it’s important.
Flood Insurance Basics – What Is Flood Insurance?
Flooding is the most common natural disaster to affect the United States.
No matter what state you live in, flooding is a serious risk. Flooding has many causes including storms, excessive amounts of rain, changes in the flow of water both above and below ground from new development, melting snow, and levees and dams breaking.
It doesn’t matter where you live. No home or business is immune to water damage.
Flood insurance offers peace of mind and helps you recover if your property is damaged by a flood. Even a few inches of water can cause major and costly repairs.
This can easily lead to financial ruin. If you don’t have flood insurance, you may have to take out loans or pay out of pocket to replace or repair your damaged property.
With flood insurance, you only have to pay a small premium, once a year.
Flood Insurance – What Does It Cover?
It’s important to work with your insurance agent to choose a plan that works with your particular needs.
You want to make sure that you go with a policy that covers what you think it does. There is nothing worse than experiencing a loss and finding out that you didn’t purchase the correct coverage.
You have the option to purchase simply a buildings/structure policy or to add contents coverage as well. If you fail to add additional coverage for contents, they won’t be covered if a flood does occur.
Most people choose to purchase building coverage and contents coverage.
There is a separate deductible for each of these policies. Like with other types of insurance, your premium amount will be dependent on the deductible you choose.
What Is Excluded On Flood Insurance?
The cause of the flooding matters when it comes to determining coverage.
For example, damage caused by a backed up sewer will only be covered if it results directly from flooding as opposed to some other kind of problem. As with most insurance policies, there are some exclusions.
While most of your property and contents will be covered, flood insurance policies do not have additional coverages that often come with business policies. Examples of these include loss of use, financial loss caused by business interruption, and additional expenses.
It’s also important to note that there is usually a 30-day waiting period after purchasing coverage for the policy to go into effect. Of course, there are some exceptions.
Reasons to Get Flood Insurance
Now that you know a little more about flood insurance, let’s look who benefits from flood coverage. Keep reading for some of the reasons you should buy flood insurance.
If You Live in a Flood Zone
Flood Insurance is mandatory for those who live in a designated flood zone. These are areas that have been proven to be at a high risk of experiencing flooding.
If you live in one of these areas, you won’t have a choice. When you purchased the property, you should have purchased flood insurance.
If for some reason you do not have flood insurance and live in a flood zone, get coverage as soon as possible.
If You Live in a Low-Risk Area
Even if you don’t live in a designated flood zone, you could benefit from having flood insurance.
Over 20 percent of claims from flood damage happen outside of high-risk flood zones. Even those in moderate or low-risk zones are at risk for flood damage.
Even If You Have Other Insurance
You might be thinking that you don’t need flood insurance if you already have homeowners insurance or renters insurance.
The truth is, these types of insurance almost always exclude damage caused by a flood. Your policy likely contains an endorsement stating this.
The point of the exclusion is to separate flood insurance so that coverage and premiums can be based on individual needs.
It Pays to Have Flood Insurance
Flood insurance will cover your damage whether or not there is a Presidential Disaster Declaration from the flooding.
Flood insurance claims average over $30,000 and do not require repayment. Your other options for disaster assistance are less helpful.
The U.S. Small Business Administration offers loans but they have to be paid back and include interest. FEMA also offers disaster grants, but they are capped and usually only offer around $5k per household.
Neither of these options will provide enough money to make you and your property whole after incurring damage from a flood.
Do I Need Flood Insurance
If you are still wondering, “Do I need flood insurance?” or if you have decided to purchase flood coverage, the next step is to talk to your insurance agent.