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Flooding is the most prevalent and expensive type of natural disaster in the country. According to the Insurance Information Institute, $50 billion worth of losses are attributed to flood damage each year.
In certain parts of the country, floods can occur any time. For example, if you own a home near an ocean, river, lake, pond, creek, or simply on low land, you may get a twinge of panic each time a storm looms over your town or city. For homeowners in these locations, flood insurance likely is required by lenders.
For other homeowners, the thought of flood insurance probably never crosses their minds. But maybe it should. According to the National Flood Insurance Program, every state saw instances of floods or flash floods within the past five years. And nearly 20% of flood insurance claims come from homeowners who live in moderate-to-low risk areas.
No matter which category of homeowner you fall under, here are five things you may not know about flood insurance policies:
Flood insurance isn’t part of standard home insurance
Typically, home insurance policies don’t include coverage for flood damage. To receive protection from flooding, you’ll typically need a separate insurance policy that focuses on this singular type of natural disaster. Flood insurance is sold through the NFIP as well as several private insurers.
However, there are exceptions to every rule. If a pipe bursts in your home and causes water damage, you likely will receive coverage from your home insurance policy. Speak with your local agent for clarification on multiple scenarios and find out whether a flood insurance policy is the right choice for you.
Flood insurance doesn't go into effect for 30 days
When you purchase a flood insurance policy, there’s a 30-day wait period before it goes into effect. So if you live on one of the coasts and purchase a policy a week before a hurricane is scheduled to roll through town and your home suffers flood damage from that hurricane, you’ll likely have to pay for repairs on your own.
Flood insurance can be affordable
The average yearly cost for flood insurance is $700, according to the NFIP, though it can vary greatly depending on whether you live in a high risk zone; your home has a basement; if you choose contents only or building and contents coverage; the size of your home; and the amount of coverage you choose.
How much can a little water hurt? The average amount of damage caused by just two inches of standing flood water in a 1,000-square-foot home is $10,670, according to the NFIP. That house a little small for you? The same amount of standing water in a 2,000-square-foot home would cause about $21,000 in damage. Many homeowners, when they weigh the costs of flood insurance against the amount they’d have to pay out of pocket to repair damage from a flood, decide purchasing a flood insurance policy is a no-brainer.
Flood policies may not cover everything
Policies generally only cover damage directly caused by flooding, so if your home is uninhabitable due to mold or mildew damage that could’ve been avoided, you may be out of luck.
Flood insurance policies typically cover the contents of your home such as furniture that gets damaged by water, but property outside the home may be a different story. If patios, decks, or the furniture that sits atop them get damaged due to a flood, the cost to repair or replace the items may fall solely on you.
Plus, if you live in a high risk area, damage caused by windstorms could be excluded from your home insurance policy. While you’re discussing a separate flood insurance policy with your agent, ask if you may need a windstorm rider as well.
100-year flood zones
The government maps out 100-year and 500-year flood zones and the price you pay for your policy will vary depending on which one you live in. If your area is a 100-year flood zone, that means it’s been determined that there’s a 1% yearly chance of flooding. That doesn't sound like much, right? But over the life of a 30-year mortgage, that translates to a 1 in 4 chance of a flood.
This system can get confusing, so give your agent a call for clarification.
Shannon Ireland writes for SafecoInsurance.com and HomeInsurance.com, an online resource for homeowners and drivers across the country. Offering comparative automobile and home insurance quotes, consumers rely on HomeInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.