Flood Insurance; Do I Need It and Is It Worth The Investment?

Flood insurance is not included in standard homeowners insurance policies. Homeowners, condo owners, renters and commercial business owners are able to buy flood insurance. Your are obligated to buy flood insurance if you live in a high risk area, you can still buy flood insurance if you live in a moderate to low risk area. For those that live in a moderate to low risk area, they will probably be eligible for preferred rates.

The National Flood Insurance Program (NFIP) provides flood insurance to NFIP partnership participants. As long as the community agrees to enforce sound floodplain management standards. The Federal Emergency Management Agency (FEMA) works with ninety private insurance companies to provide flood insurance to that area. The rates do not vary from company to company. They are set at the same level for each category of home. The categories are established by the date of construction and type of construction and the location of the home.

The average rate for flood insurance for moderate to low risk homes is $129 per year. For high risk properties the rate could be as high as $1650 per year for homes insured for as much as $250,000, building only. This coverage provides protection from flooding as a result of flash flooding, hurricanes and tropical storms. While residents in high risk areas are required to carry flood insurance, they generally represent 26% of flood victims in a 30 year period. People in moderate to low risk areas actually file 20% of the flood insurance claims. They also get one-third of the disaster assistance loans the government makes available.

The standard rate insurance policy covers the building and content coverage is optional. This is the only type of coverage available for high risk properties. No policies cover the land. The policies generally have a 30-day waiting period before the policy goes into effect. Flood insurance premiums are dependent upon the year the building was built, the building occupancy, number of floors, the flood risk, the location of the lowest floor in comparison to the elevation of surrounding land, the location of the contents and the deductible.

Flood insurance is also available for renters and condo owners. Renters insurance in moderate to low risk areas can be purchased for as little as $49 per year for contents only. In high risk areas the rates are calculated using the same parameters as are used for homeowners. Condo owners and renters are privy to similar rates for moderate to low risk and high risk properties.

Flood insurance can be expensive but the cost of the insurance compared to the cost of replacing what is lost in the event of a flood is miniscule. Being self insured is a cost most people simply cannot afford. The fact that the government realized the need for flood insurance and developed NFIP to direct the process of getting flood insurance instituted in this country in 1968 proves that there was an enormous need for the insurance and homeowners should consider buying it if needed.