Am I required to have flood insurance?
As we mentioned before and must stress again, flood insurance is never included in your homeowners policy. Flood insurance is only provided by the National Flood Insurance Program (NFIP), which is a non-profit carrier brokered by all insurance agents. No, you are not required to carry a flood policy unless you have a mortgage that requires it and you are in a Special Flood Hazard Area. Your insurance agent can assist you in determining if you are in a flood zone with a search specific to your address called a Flood Zone Determination. More than likely, your lender and realtor will know this before you even go looking for insurance.
In light of the seemingly increasing number of storms we see each year all across the country, producing devastating flooding in areas never before affected by flooding, we typically urge all of our clients to be aware of the benefits of having a flood insurance policy. 90% percent of all natural disasters in the U.S. involve flooding and almost 25% of all flooding occurs in moderate to low risk areas. There is a 30-day waiting period for all flood policies, with the exception of a new home purchase where the lender requires flood coverage. You do not want to try and wait until there is a forecasted storm to quickly buy a flood policy because you simply will not be able to.
Many homeowners hesitate to purchase flood insurance because they feel flooding is not as likely if they are not in a high-risk flood zone and some also believe that they will be eligible for disaster assistance should their home flood. Unfortunately, they are wrong on both counts. Federal Disaster Assistance requires a Presidential declaration in order for most any type of assistance to become available. The government has many parameters around disaster declarations and not all flood incidents are declared a disaster. Flood insurance claims are paid whether a disaster is declared or not.
The most common disaster assistance offered comes in the form of a loan that must be repaid with interest, with terms that can extend as long as a home loan, up to 30 years. These loans are provided through the Small Business Administration (SBA) and require an application and documentation typical to any loan. Flood insurance reimburses you for all covered losses up to the limits of your policy for your dwelling (ranging from $100,000-$250,000) and contents (up to $100,000). There is never any re-payment for a flood insurance claim.
For homeowners who are not in a high-risk flood zone, which are considered preferred risk policies, the premium is typically an average of as little as $130 to $365 annually. An SBA disaster loan can easily have a repayment amount of this amount every month, for the entire life of the loan!
Many people do not buy flood insurance for a number of reasons and suffer a huge financial loss when their homes are severely damaged or even completely destroyed by flooding. You see it happen every year somewhere in our country. We strongly urge all our clients to be on the safe side and carry flood insurance. It is very little to pay for a lot of peace of mind and it could save you from a financial disaster as well.
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