If you own/purchase a home in certain flood zones and you have a mortgage on the property, there doesn't tend to be much of a decision on whether to purchase flood insurance or not as the lender is likely to require you to. But, what about when it may not be required because you paid cash or you aren't in the flood zone requiring it. This is a great article shared by the Florida Board of Realtors to help home buyers/owners make decisions about flood insurance including an overview on why you may need flood insurance, how flood insurance works and other related topics.
Flooding is the nation’s costliest and most common disaster, but many property owners outside high-risk FEMA flood zones don’t think it will ever be a problem.
WASHINGTON – On Sept. 19, tropical storm Imelda hit Texas, and even though it was a full hurricane-force storm, Texans – homeowners, business owners and renters – filed 10,600 flood insurance claims. As of Oct. 29, policyholders have been paid 40% of claims or more than $280 million to repair their homes.
Flooding is the nation’s costliest and most common disaster, but property owners who live in communities participating in the National Flood Insurance Program can purchase affordable protection to insure against flood losses.
Yes, if your community participates in NFIP. You are eligible to purchase a flood policy with the same coverage you would receive if you lived in a high-risk area.
Why do I need flood insurance?
Policies issued by NFIP pay regardless of whether there is a Presidential Disaster Declaration in place.
The average flood insurance claim for Tropical Storm Imelda was over $54,000 and does not have to be repaid.
Standard homeowner’s insurance policies do not cover floods.
Even if you live outside a high-risk flood zone, called a Special Flood Hazard Area, it’s a wise decision to buy flood insurance. People who live outside high-risk areas file more than 25% of flood claims nationwide.
If it can rain, it can flood. Flood zones are areas where there is a higher statistical probability of a flood occurring, but that doesn’t mean floods don’t occur elsewhere.
The Federal Emergency Management Agency (FEMA) calculations show that 1 inch of water can cause $25,000 worth of damage to a home; 18 inches or more could mandate repairs to the electrical system, and the heating and cooling system. It also means replacing doors, appliances and cabinetry.
How does flood insurance work?
If a community participates in the National Flood Insurance Program (NFIP), homeowners or businesses can cover both building and contents in a flood policy. Renters get coverage for contents only.
To find out if a community participates in NFIP, contact a local insurance agent. Flood insurance from the NFIP is only available in participating communities.
In states recently impacted by storms and flooding, NFIP streamlined the claims process, enabling policyholders to receive advance payments to jump-start rebuilding. In 2018, policyholders quickly received about 25% of their payments as an advance. Advance payments may provide: up to $5,000 without an adjuster visit or additional documentation; or up to $20,000 with photos/video evidence and receipts or a contractor’s estimate.
A Preferred Risk Policy (a lower-cost flood insurance policy) provides both building and contents coverage for properties in moderate-to-low risk areas. The policy can be purchased for as little as $395 per year.
When should I buy a policy? As soon as possible.
NFIP cannot pay a claim if you don’t have a policy in effect when damage occurs.
A new insurance policy from NFIP becomes effective 30 days after you buy it unless the purchase is associated with the origination, renewal or extension of a federally backed loan on property in a high-risk area.
Even if I’m not in a flood hazard area, can I purchase flood insurance?Can I get flood insurance if I’m renting a property?Yes. If you are a renter who lives in a community that participates in NFIP, you can get flood insurance to cover the contents of your home, apartment or business.
How much does a policy cost?
An insurance agent can talk about cost of coverage for a specific property.
NFIP policy holders can choose the amount of coverage.
The maximum for one-to-four family residential structures is $250,000 in building coverage and $100,000 in contents coverage.
For residential structures of five or more units, the maximum is $500,000 in building coverage and $100,000 in contents coverage.
The maximum for businesses is $500,000 in building coverage and $500,000 in contents coverage.
How much will I get from NFIP after my building or contents are damaged by a flood?
The amount paid to the policyholder on a homeowner’s flood insurance policy will cover only the cost of actual damage caused by the flood.
The amount paid on contents will cover only actual losses caused by the flood.
The amount paid to businesses covered for structure and contents will be only for actual losses caused by the flood.
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