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 Flood insurance is something you might want to look into, even if the community in which you live has never experienced widespread flooding. Many homeowners mistakenly believe that their homeowners insurance policy provides flood insurance. Renters often make the same mistake, thinking that they don't need flood insurance, but this is not always true.
Flood Insurance Statistics
People are mistaken in their beliefs about flood insurance because they see and read stories about homes that are flooded and the recovery assistance that is offered by the federal government. But that assistance to the homeowner is in the form of low interest rate loans, not insurance. In fact, according to the national statistics nearly 25% of all flood insurance claims come from areas that have minimal flood risk.
So just because a flood has never occurred in your community does not mean that you are not at risk. Homes located in the floodplain have a 26% chance of suffering from flood damage over the course of 30 years. Compare that to the 4% risk of loss due to fire and you can put things into perspective - a home built in a high-risk area is five times more likely to suffer damage from a flood than a fire over the course of a 30 year mortgage.
Flood Insurance and Loans
Your mortgage company will probably require that you maintain flood insurance during the term of the loan if the structure is in a high-risk area. If the home is not in a high-risk area, but instead in a low- to moderate-risk area, you may not be required to carry flood insurance. Just keep in mind what we mentioned earlier - nearly 25% of all flood insurance claims come from these areas.
If during the lifespan of your mortgage, the floodplain map changes for your community, your mortgage company will notify you that you must purchase flood insurance. In fact, these flood plain maps change all the time and your community plays a role in this process. That's because together with the Federal Emergency Management Agency (FEMA), your community will collect the information needed to create an accurate Flood Insurance Rate Map (FIRM) via a Flood Insurance Study (FIS) of the region.
Flood Zones and Flood Insurance Rate Maps
A Flood Insurance Rate Map or FIRM is a map created by the National Flood Insurance Program for floodplain purposes. A FIRM will show a township's base flood elevations, floodplain boundaries as well as flood zones.
As a homeowner or even a renter, you can use this map to get a more reliable indication of the flood zone that you home may be in. However, floodplain maps are updated all the time as meteorological events occur. You can contact your insurance agent, insurance company or your township's floodplain manager to get the most up-to-date information on your flood zone.
National Flood Insurance Program
The National Flood Insurance Program, or NFIP, enables homeowners and property owners living in participating communities to purchase affordable flood insurance protection. This insurance was designed to provide assistance to property owners while meeting the rising cost to repair buildings damaged by flooding.
Participation in the National Flood Insurance Program is based upon an agreement between local communities throughout the United States and the federal government. At the heart of that agreement is the understanding that participating communities will adopt and enforce a floodplain management building ordinance that reduces the future financial risks associated with constructing new developments in Special Flood Hazard Areas (SFHA).
In exchange for their cooperation in passing local ordinances discouraging building in these SFHAs, the federal government agrees to make available affordable flood insurance to protect that community's residents against the financial hardships associated with a flood loss.
Getting Flood Insurance Coverage
If you're a homeowner, you can get up to $250,000 worth of insurance on your home's structure and an additional $100,000 on the contents of the home. Renters can get up to $100,000 worth of flood insurance on the contents of the home.
The flood insurance policy will also cover the home's foundation and the equipment that is necessary to support the home. This includes items such as water heaters, furnaces, and electrical panels. Flood insurance does not cover any improvements to the basement you may have done such as finishing walls, floors and ceilings. Personal belongings kept in the basement are also not covered by this insurance.
Flood Insurance Costs
There are a number of factors that are used to calculate flood insurance costs. This includes items such as the amount of coverage, the age of the home and the flood zone that the home is located in. For example, insurance premiums for the maximum coverage available on homes located in low-to-moderate risk areas ($250,000 on the structure and $100,000 on the contents) currently run around $320 per year.
That might sound like a lot of money, but keep in mind that the typical homeowner's insurance policy does not cover you for flood damage. Renters also should consider flood insurance if the home they are renting is sitting in a flood plain. Certainly the renter would not be responsible for the structure itself, but if they have purchased furniture or other items of value that are in the home, it may be a wise thing to purchase flood insurance on to cover the contents in the home.
About the Author - Flood Insurance
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