Whether you live in a coastal area or in the heart of the Midwest, weather happens. Accurate forecasts can help minimize the potential for storm-related issues by giving homeowners time to prepare. However, solid construction and having appropriate insurance coverage are two of the surest ways to minimize the financial impact.
While most homeowners’ insurance policies cover water-related damage caused by rain coming into your home through a compromised roof or windows, once the water is on the ground and the damage is due to flooding, it is a different story. Flood damage requires separate coverage.
The availability and cost of flood insurance, however, depend on where you live. Flood insurance is only available through a government program called the National Flood Insurance Program (NFIP). Your community needs to be a participant in this program for you to be eligible to purchase flood insurance.
Flood insurance is voluntary except for homes located in a federally designated flood plain zone. These homes are required to have coverage if they were financed with a federally backed mortgage.
With premium rates for this type of policy established by the NFIP, it eliminates the need to contact multiple insurance agencies seeking the best deal as you would do with other insurance policies. The only price variance would be for homeowners who are eligible for subsidies.
However, the NFIP establishes the premiums you pay based on your location and the type of coverage you request. The cost can range from a few hundred dollars a year for coverage that might help offset some of the cost of repairing your basement and the replacement of its furnishings, to several thousand dollars a year for full structure coverage (up to $250,000) and the replacement of personal belongings (up to $100,000).
Talk to Your Insurance Agent
When buying a home, talk to your insurance agent to determine the status of the areas where you are looking at homes. This will help you assess the availability of insurance and its cost versus the risk—factors you may want to consider before placing your offer.
When you have this conversation, be sure to address the following points. They will help you determine the level of insurance that makes sense for you.
Specific circumstances covered and the likelihood of them occurring.
- Any agency fees that might be charged in relation to this type of policy.
- Whether coverage is for actual cost or the replacement value.
- The likelihood that the NFIP may adjust local maps in the near future and alter the cost and nature of the coverage needed.
Weighing Your Options
Whether you decide flood insurance coverage is necessary, be proactive. Like the weather, things can change. Monitor adjustments in your zone map and construction in your immediate area. New developments, infrastructure projects, and even a neighbor’s landscaping choices can alter the path storm waters may take. Being preventative can help you protect your home, its belongings, and your bank account in the long run.