A Guide To Flood Insurance

If you own a home or company, you should take steps to protect it from floods. Future heavy storms are unpredictable and there have been many instances of people experiencing flooding that have not purchased flood insurance coverage.

Do you believe flood risk is only an issue near coastal areas? Think again! 97% of the people in the United States believe a flood will not strike their house anytime soon. Statistics show that this is not the case. Floods caused by hurricanes or heavy rain can occur not just in coastal areas but in dry areas too. It possesses a similar risk in all corners of the USA. 

Does Global Warming Pose a Bigger Threat of More Flooding?

Researchers from Brooklyn-based nonprofit First Street teamed with more than 80 real estate, academia, and insurance experts and compiled a flood database. With this flood database, nearly every individual in the US can assess the risk of property flooding as it exists today. It also tells how the flooding threat will change over the next 30 years.

We get insurance for every minor inconvenience, don’t we? Car insurance, health insurance, education insurance. Name it, and we have it! We spend almost half our lives saving hefty amounts to invest in properties. We spend too much money on building our valuable properties, getting the perfect furniture to make the construction stand out, and making our homes our biggest asset. 

As the climate is changing around the globe, weather uncertainty prevails. With the rate of global warming going up, the events of the occurrence of natural disasters simultaneously go up. 

Thunderstorms, hurricanes, and the risk of melting glaciers and ice sheets are also increasing, resulting in more chances of flooding. Andrew Hurst, an insurance research analyst, said, “The chances for flood damage are already bad, and it’s going to get worse.” 

Natural Disasters in the United States

According to stats, 90% of the natural disasters that hit the United States are related to flooding. In 2021, violent thunderstorms resulted in losses to the US economy of around $37.25 billion. Approximately $169 billion were lost due to economic losses brought on by natural disasters. It gives us a clear insight into how much damage thunderstorms, torrential rains, and flooding can cause.

The usual Homeowners’ policies and renter’s policies do not cover flooding. The federal National Flood Insurance Program (NFIP), managed by the Federal Emergency Management Agency (FEMA), is the most extensive single-line insurance program in the US. 

With over 5 million policyholders, it offers insurance coverage of about $1.3 trillion. Homeowners, renters, and businesses can purchase insurance policies. For now, only 15% of homeowners have purchased flood insurance up till now in the United States. 

What is Flood Insurance?

Flood insurance protects the property against losses from water damage. The damage can be from continuous or severe rain, melting snow, coastal storm surges, clogged storm drainage systems, or failure of levee dams. 

In contrast to homeowners’ insurance, flood insurance is a separate policy. Home owners’ insurance does not cover damage or destruction brought on by floods. You have to purchase an independent insurance policy for it.

A flood is often seen as a major event and can cause significant damage or loss. If this rare event happens, you can submit a claim with the insurance provider and receive coverage up to the policy’s limit when flood impacts or destroys your home and personal property.

Before we get to the differences between flood insurance and homeowners’ insurance, we need to know precisely what homeowners’ insurance is. 

Does Homeowners Insurance Cover Flooding?

The answer to this in the majority of policies is no. In the case of a catastrophe, tragedy, or theft involving property, homeowners’ insurance offers necessary financial protection. It ensures that the primary house’s structure, including all the valuables inside, are insured if they are harmed or lost. Standard homeowners’ insurance is typically purchased by homeowners, renters, and businesses. 

Damage from a fire accident is a typical example of the kind of destruction that homeowners’ insurance typically covers. According to Mr. Olsen, 

“People are four times as likely to flood than they are to have their house catch on fire. Every single person automatically has fire insurance if they have homeowners insurance cover. The reality is flood insurance is just as important as fire insurance. But because it’s not included or required, most people don’t have it.” 

Now that we know what flood and homeowners’ insurance are, let’s discuss their differences.

Differences Between Home Insurance and Flood Insurance

  • A homeowners’ insurance gives you financial protection in case of theft or destruction of your property by accident like fire. While flood insurance, on the other hand, covers all damage and destruction caused by flooding water. 
  • Your homeowners’ insurance may cover water damage brought on by leaky pipes; flood insurance covers damage to electrical and plumbing systems and built-in appliances brought on by a waterbody rising.
  • Homeowners insurance pays out if your pipes burst and flood your home. It also pays if your toilet overflows or rain leaks through an unexpectedly broken roof. Additionally, flood insurance pays out when water comes in from the ground, like rainstorms, storm surges, lake overflow, etc.
  • Homeowners’ insurance also covers the damage caused by high winds, while flood insurance covers damage caused by rising water. 

National Flood Insurance Program (NFIP)

According to the National Flood Insurance Program, “Just a few inches of water from a flood is enough to cause tens of thousands of dollars in damage.” 

The National Flood Insurance Program (NFIP) is provided by a network of more than 50 insurance companies. The National Flood Insurance Program (NFIP) is direct to the general population. 

Flood insurance is provided to property owners, businesses, and renters. It helps them to overcome the damage caused by flooding faster. 

Along with the NFIP, FEMA works to maintain current maps of the United States’ flood zones or the places most likely to experience flooding. As the weather pattern changes, these zones also tend to change, so FEMA has to keep up with that. 

Properties in Zone A are at a very high risk of flooding and are mainly positioned alongside the coast. Areas under Zone B, C, and X have a low to moderate risk of flooding. In comparison, the ones falling in Zone D are yet to be determined. Therefore the flood zone maps have to be under review all the time. 

A local insurance broker can help you purchase one of these policies or refer you to one by contacting the national program at (888) 379-9531.

To take a look at the flood zone determination, you may visit the Floodsmart government website

How Does Flood Insurance Work?

A flood insurance policy works the same as any other insurance policy. The insured homeowner pays a yearly premium determined by the flood risk of the property and the deductible they pick. If flooding causes damage or destruction to the property, the owner will be compensated according to the policy limit using cash for the cost of repairing the damage. 

Before closing on a property, the homeowner must obtain and maintain insurance coverage to cover the loan’s principle. Typically, the lender will also require monthly mortgage payments for cover, keeping the money in an escrow account, and pay the whole premium to the insurance provider once a year (just like how taxes on property and homeowners insurance are dealt with). 

Therefore, after obtaining the original policy, the homeowner may not have to take any additional action beyond making monthly mortgage payments. Furthermore, $100,000 are offered for separate coverage of personal belongings.

Before Choosing a Flood Insurance Policy

  • Federal flood insurance policies can be purchased outright from an insurance professional, making it very simple and easy. Insurers that write and provide service for NFIP policies number close to 100.
  • A 30-day waiting period is necessary before a flood policy takes effect, so avoid delaying until the last minute to buy it.
  • The NFIP policy maximums are insufficient to cover certain people’s valuables fully. So, a rising number of private insurers have started issuing excess flood policies intended to provide homeowners extra protection from water damage above and beyond the NFIP policies. Additionally, some private insurers have begun to provide “first dollar” flood policies.

How to Get Flood Insurance?

Once you know flood insurance and how it works, the next part is to get one for yourself. If you are seeking the answer, know there are two ways to look for a policy.

National Flood Insurance Program, The federal plan from Federal Emergency Management Agency (FEMA) is called the National Flood Insurance Program (NFIP). The National Flood Insurance Program provides flood insurance to the majority of homeowners. 

Your agent for house insurance can process your application for a policy. A local insurance broker can help you purchase one of these policies. You can also contact the national program at (888) 379-9531 to inquire about it. 

However, the insurance gets into effect after 30 days. Although the national program’s coverage is restricted, the federal program’s scope is dependable.

Suppose your basement floods and your insurance company covers the cost of repairing the walls, the boiler, and the water heater. Still, it will not cover the cost of replacing your personal belongings, including couches, televisions, and clothing. If you have to live out temporarily, you will have to cover your living expenses; the insurance company will not pay it.

Buying Private Flood Insurance

As compared to National Flood Insurance Program (NFIP), Private personal flood cover is somewhat more flexible but not very reliable. Many companies offer private personal flood plans. 

The prices may vary according to the risk assessment of the insurance provider as the government does not determine them. They may also be lesser compared to NFIP in some cases, depending on the location of your property. Apart from this, a private carrier could terminate the coverage mid-term or refuse to renew it — leaving customers alone in an emergency. 

The private personal flood policy covers the cost of its customer’s personal belongings as well as living expenses. Additionally, private programs typically go into effect sooner than a national policy. They may offer coverage alternatives that FEMA does not, making them useful for those who own costly or vast properties or feel that the FEMA options are insufficient.

What if there is a Flood and I Don’t Have Insurance?

Without insurance, loans are usually the primary method of flood relief. The federal government frequently makes no-interest or low-interest loans as part of the restoration process if your community is declared a disaster area. These loans still have to be repaid, and the total cost of your loss or damage remains your responsibility.

What is the Average Cost of Flood Insurance in the United States?

Flood coverage can offer a significant financial range, while homeowners insurance, on the other hand, does not cover the damage from flooding to your home and possessions. The National Flood Insurance Program’s (NFIP) estimated yearly premium for flood insurance is $771, or $64 per month. However, the cost may vary depending on the following factors:

Factors That Affect The Cost of Flood Insurance

  • Flood Risk
  • Characteristics of the building
  • Type of policy you choose
  • Deductible amount
  • The insurance company you choose

5 Flood Insurance Companies in the United States to Consider

GEICO Flood Insurance

GEICO is the finest and overall best flood insurance provider. Due to its excellent customer satisfaction levels, strong financial position to support its claims, and online quote to determine how much your insurance will cost, it works best for everyone. 

With it, you can also contact and connect with a live representative. GEICO does not cover personal belongings that you maintain in the basement. You won’t be eligible for insurance from them unless your house is partially or wholly overwater.

The Flood Insurance Agency

Due to its transparency, the Flood Insurance Agency (TFIA) is the preferred option for commercial flood insurance. You can customize your coverage outside the NFIP’s restrictions, evaluate what they include, calculate the costs using an online calculator, and receive the same or better coverage for less money. 

It is worth noting here that TFIA does not cover specific situations. Your building will not be eligible if it is in a town that does not participate in FEMA or is in a Coastal Barrier Resource Act (CBRA). 

TFIA will not be allowed to offer flood coverage if the structure has experienced multiple floods in the previous five years or has been identified by FEMA as Severe Repetitive Loss Property.

Assurant Flood Insurance

Insurance firms aren’t an exception to the practice of more and more customers attempting to get the advantage of the ease of online buying and customer care. If you’re looking for an online insurance service, Assurant is the best choice for you. 

You can examine insurance details, pay your renewal, or select an advance payment option. Assurant is the best pick as an insurance company with its massive online offerings.

FloodSimple Insurance Services

Customers commend FloodSimple Insurance Services‘ online quick cost estimates as convenient for them. FloodSimple’s program is why it has been chosen as the finest customer service provider. 

Except for needing an elevation certificate, there are no particular exclusions or inclusions with FloodSimple. In addition to underwriters evaluating each property individually, the company also uses computer scoring.

USAA Insurance

USAA offers flood policy options that an agent can easily customize to meet your needs by providing flood coverage through the NFIP and its broker network for extra coverage. The Company is veterans’ most acceptable flood insurer because of its flexible policy options and generous member reimbursements. See USAA Insurance Review.

The insurance company has an online quote form, or you may begin the process via contacting an agent. USAA has an excellent reputation for offering customer support 24/7 via phone and email. Additionally, you can submit a claim and view your account remotely through their app.

Should I Get Flood Insurance?

Having flood coverage is one of the best ways to thoroughly safeguard your belongings from the cost of flood losses and damages. Therefore, having private flood insurance will be the key to complete protection due to the climatically unpredictable nature of the weather. 

A backup plan to safeguard your house and everything inside it is even more crucial if you live in a flood-prone location. 

If your home is close to a river that can overflow, situated by the seaside, or up against a slope that might experience mudslides, you probably require insurance. You might not believe that you need a separate policy, but in reality, you most likely do, even if you are not living in a high-risk flood zone. 

In conclusion, it is fair to state that even those who do not reside in a high-risk flood zone should get flood coverage along with their homeowners’ insurance. Thunderstorms and hurricanes are likely to cause flooding as the global climate changes.

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