Water is essential to life, but when it comes in the form of a flood, it can inflict severe financial damage and even render a home unlivable. You can alleviate that risk with flood insurance, but itâ€™s important to understand its terms and conditions.
You might think you are at greater risk from fire than flooding. But did you know that 90% of all natural disasters in the U.S. involve flooding? Floods and flash floods happen in all 50 states. Some overlooked causes of flooding include hurricanes, winter storms and snow melt.
Homeowners in high-risk areas are twice as likely to suffer a loss because of a flood then a fire. And property losses from flooding are 30 percent more than losses from fire. From 2003 to 2012, total flood insurance claims averaged nearly $4 billion per year.
Federal aid may be available in areas defined by the government as federal disaster areas. Often times, however, that aid is in the form of a loan that must eventually be repaid, and the cost per month is typically much higher than flood insurance premiums. Whatâ€™s more, fewer than 10 percent of all natural disasters qualify for that assistance.
So that leaves your homeowners policy to save the day, right? Not necessarily. Contrary to popular belief, damage from flooding is usually not covered under your homeowners or renters policy. Instead, flood insurance may be purchased from an insurance agent through the federally backed National Flood Insurance Program (NFIP). American Family Insurance, for example, contracts with National Flood Services (NFS), which administers write-your own NFIP policies and are available to homeowners, condo owners, apartment owners, renters and business owners.
To qualify for the NFIP program, property owners must live in a community that participates in the program. The federal government requires flood insurance as a part of mortgages for houses in flood-prone areas. You might be eligible for a reduced rate if the community you live in has agreed to certain zoning regulations.
One important thing to remember is to plan ahead. When the snow melts or the rain comes, it may be too late to purchase a policy. Generally, there is a 30-day waiting period for flood insurance to become effective once the full premium has been paid. The waiting period is waived, however, when obtaining, increasing, extending or renewing a federally backed loan for a property. In cases where a property has been reclassified as high-risk due to a revision in the Flood Insurance Rate Map (where it is now in a floodplain where before it was not), the waiting period is only one day.
In addition to insurance, you can also take simple steps to help minimize your risk for large losses, like moving electronics and valuables to higher areas of the house. Also, if you need flood insurance in excess of the NFIPâ€™s limits of $250,000 for residential coverage of the building and $100,000 for personal property, and $500,000 each for building and contents of commercial properties, ask your insurance agent about specialized policies to provide excess coverage. There are also contents-only policies available for renters. For more information on the national flood insurance program, contact your insurance agent, or go to www.floodsmart.gov.