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WTF? (What The Flood) Why Flood Insurance Isn’t Included in Your Homeowner’s Policy

Homeowner’s insurance is an important thing for any homeowner to have. It covers your home and belongings if they are destroyed by disasters such as storms, tornadoes, or fires and the like. But many homeowners don’t realize that standard hazard policies don’t cover flood damage. Flood insurance is not included in regular homeowner’s insurance because most people don’t live in places with high flood risks. It stands to reason that if you live far from any bodies of water, you shouldn’t be required to pay higher premiums to be covered in the unlikely event of a flood. If you want — or are required to carry — flood insurance, you’ll have to get it from a separate policy.

Flood insurance is provided by the government through the Federal Flood Insurance Program, although it can be purchased at the same time from the same insurance agent writing your general homeowners insurance. Flood insurance is relatively inexpensive, so if you live near a body of water it may be worth considering, depending upon your circumstances.

Flood insurance is not required by your lender in most cases unless you are in a designated flood plain and it is commonplace for lenders to order a flood certification as part of your loan approval process. If you are getting a federally-backed mortgage (i.e. FHA, VA) in an area with high flood risk, the law requires you to have flood insurance. Whether it is required or not, flood insurance can give you the security of knowing that your damages are covered in the case of a flood.

Those who are not in flood-prone areas may be able to get a lower premium on their flood insurance. Even if you’re not near a body of water, flooding is possible from melting snow or water running downhill. If you are potentially at risk for these occurrences, you may want to consider flood insurance, as well.

Flood insurance covers the replacement value of your home and the cash value of your belongings, however, there is a limit to how much the insurance will pay on both. To compensate, some specialized insurance companies sell excess flood insurance. It picks up where the federal policy leaves off, covering the remainder of replacement value on your house and cash value of your personal belongings.

People in flood-prone areas sometimes don’t feel they need to purchase this insurance because the Federal Emergency Management Agency (FEMA) offers assistance after a flood. But FEMA can only provide assistance in areas that have been declared federal disaster areas. If the President does not make this formal declaration, those without insurance won’t receive any assistance to rebuild and recover.

FEMA assistance is limited to declared federal disaster areas

It is important to note that flood insurance has a 30-day waiting period. If you think you can ‘rig the system’ and buy flood insurance after a flood warning is forecasted, think again. Your policy will not cover any damages that may be incurred from that incident. If you think you’re at risk for flooding, consult your insurance agent. Getting the right kind and amount of insurance right away is the practical thing to do.

When considering the purchase of a home you should always determine if it’s in an area at risk for flooding BEFORE submitting your offer. The added cost of insurance could affect your loan eligibility or represent an expense you are unwilling to pay.

To see if your home is in or near a 100-year flood plain, use this link: https://msc.fema.gov/portal/search

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