Flood insurance is mentioned a lot to homeowners, especially now that rates are controlled by the National Flood Insurance Program (NFIP). While flood insurance can be beneficial to some homeowners, how do you know if you need it? Here are some things to keep in mind when looking into purchasing flood insurance.
Consider your financial need.
Floods have been identified as the nation’s number one national disaster and, unknown to some, can occur in any state. Because of this, having a backup plan is needed. If you find your finances could support you in the case of flood damage to your property, then the expense of a flood insurance plan may not be required. Additionally, understand that flood insurance coverage is capped at $250,000 for structural damage and $100,000 for damage to your property within the structure. If the value of your property is significantly lower than this, then paying for flood insurance can be avoided with a strong financial backup plan.
Understand what is covered.
Standard homeowners insurance does not cover flood damage. While a busted pipe that floods the home may be covered, an area-wide flood is not. If you want the extra financial protection on your home or on the items within your home, you should purchase flood insurance.
Assess the flood threat in your area.
The number one influence on your decision to buy flood insurance should be the threat level in your area. FEMA publishes an official Flood Insurance Rate Map (FIRM) which breaks geographic areas into zones based on the danger of flooding. The FIRM is then used to provide flood insurance rates to homeowners based on their zone’s flood danger. If you live in an area of higher danger, you will definitely want to purchase flood insurance to cover any damage that may come to your property.
Ask about your requirements.
If your area has a high risk of flooding then you may be required to purchase a flood insurance plan. When required to purchase insurance you might be required to purchase a certain amount. The federal government sets standards for insurance prices on plans up to $200,000 for structural damage and $100,000 for property damage. Any mandatory insurance purchases should be within those amounts, though additional insurance can be purchased from private companies.
Feel confident in your decision.
Flood insurance plans are a smart decision for many people, but many zones are not required to purchase insurance. Whatever you decide to do, make sure it is an informed decision. If you think that your financial backup plan in case of a flood is strong enough, then do not worry about purchasing insurance. Just make sure you have confidence in the decision you are making.
