Who should have Homeowners Flood Insurance

Homeowners living in areas prone to flooding may not know that a standard homeowner’s insurance policy does not cover flood damage in the face of watery disasters. For them, flood insurance – a federally backed government policy associated with local communities and private insurance companies – is not just a lender requirement, but is also a homeowner necessity.

When flood insurance is required

In 1968, Congress created the National Flood Insurance Program (NFIP) specifically designed to help homeowners, renters, and business owners with the purchase of insurance designed to protect their property from all sorts of water damage. Today, just about every lender requires a homeowner’s insurance policy of some sort, as well as added flood insurance in high-risk areas. For instance, if you were to purchase a home in a moderate-to-high-risk flood zone, many lenders would require that flood insurance be in place before approving your mortgage application. However, if you chose a home in a low-risk flood zone, adding flood insurance would be entirely optional, but your lender would still require a standard homeowner’s insurance policy.

Why flood insurance is a good idea

Most homeowners can insure their property from flood damage for up to $250,000 and insure their personal possessions for up to $100,000. The amount of coverage you need or qualify for will depend on your assets and the median price of your property. Talk to your insurance agent if you have questions about flood insurance coverage. Waiting until it’s too late could be costly.

How flood insurance premiums are set

Price on flood insurance coverage are not exclusively market driven, making them less competitive than the average homeowner’s insurance rate. When it comes to flood insurance, most policy issuers have limits set by the federal government as to how much they can charge. In most areas, prices and coverage for flood insurance policies are predetermined and limits preset based on the amount of risk and historical flood damage. However, despite the predetermined factors and preset pricing, most flood insurance policies still allow homeowners to customize coverage to keep premiums even lower.

The average cost of homeowner’s insurance

The average high-risk area flood insurance policy is a year. However, in low to moderate risk flood areas, flood insurance policies can be as little as $129 a year. Of course, policy costs vary from one area to another.

Special notes about flood insurance

Something that many homeowners do not know about flood insurance is that most policies do not take effect for 30-days post-closing (or after purchase of the policy). This means that if you move in and you are flooded out, you are out of luck when it comes to filing an insurance claim.