Waterfront homes, flood zones, flood plains, lowlands….when do you need flood insurance and when are you required to get flood insurance? Flood insurance is specific insurance coverage against property loss from flooding. To determine risk factors for specific properties, insurers will often refer to maps that denote lowlands, floodplains and floodways that are more susceptible to flooding.
Regular homeowners insurance policies do not cover flood water damage. And policies through the National Flood Insurance Program top out at $350,000 for your home and goods. So you may need supplemental coverage if your home and possessions total more than that. But, while people tend to associate floods with a total loss, the average flood claim for U.S. homeowners is about $30,000, according to the National Flood Insurance Program.
If you have a mortgage on your home and you live in a high-risk flood zone, in most cases, your lender requires you to buy flood insurance. If you live in a moderate- to low-risk zone, and your community belongs to the National Flood Insurance Program (most do), then you have the option of buying it. So how much does flood insurance cost? It is dependent upon your risk factors. Federal flood insurance can cost just a few hundred dollars or as much as $10,000 a year. It’s just a matter of how much risk of flood there is. The NFIP (www.floodsmart.gov) can tell you your home’s exact risk of flooding. But in a nutshell, zones A and V are high risk areas. Moderate- to low-risk areas are zones B, C, and X. If you’re in zone D, the risk is not clearly known because it has not been mapped yet. But you still can purchase flood insurance. The zones are used to help determine policy rates.
Approximately 1 out of 5 flood insurance claims come from the moderate-to-low zones. This does not include homeowners who were not insured and could not file claims. If you are unfortunate enough to be in a predicament where you have no insurance and you home has been damaged by a flood, government aid is not something you can particularly count on. Government aid comes largely in the form of loans, which you will have to repay. Before you can even qualify for a loan, your area has to be declared a federal disaster area, and federal disaster assistance is declared in less than half of all flooding events.
The price of insurance through the federal flood insurance program is based on standardized rates and depends on the home’s value and whether or not it’s in a flood plain. The average price for flood insurance is about $600-$800 annually. If you rent your home or live in a condo, you can buy flood insurance for just your possessions: insuring just your possessions will be less than the amount noted above.
When it comes to the physical structure of your house, federal flood insurance policies top out at $250,000. If you have a $300,000 house that’s a total loss because of a flood, the most you can recoup through the program is $250,000 to cover the structure itself.For your personal possessions, the cap is $100,000 under the federal program. These limits are something you should keep in mind before purchasing a home in excess of $250,000 within an area that’s susceptible to flooding. While federal flood insurance pays to rebuild the structure it doesn’t cover living expenses if you have to relocate while your home is being repaired.
Flood plains (and flood plain maps) change and evolve. Just because you weren’t in a flood plain when you bought your home a few years ago doesn’t mean you’re not in one now. The FloodSmart.gov website is a great resource: it allows you to put in your address and see if your property is in a flood plain, and give you information on risks, premiums and agents.