3 Things You Need to Understand About Flood Insurance

Most people don't realize that a flood is not covered under their normal homeowner's insurance policy. If you want to be protected against a flood, you need to have flood insurance, which is a separate insurance policy you will have to purchase.

#1: Flood Insurance Is Provided by the Federal Government

Flood insurance is a little different than most other types of insurance. It is actually provided and backed-up by the federal government through a program called the National Flood Insurance Program. Although it is provided through a federal program, it is secured, or sold, through private insurance agents. Basically, that means you can purchase insurance from your regular agent, even though the program is administered through the federal government.

#2: Flood Insurance Is for Everyone

If you live in a low-lying area that is known to be a flood zone or a high-risk area, you definitely are doing to want to purchase flood insurance. However, just because you don't live in a flood zone doesn't mean you shouldn't cover yourself with the right policy. All areas are assigned a flood risk rating. If you live in an area where your risk is low-to-moderate, you can get a lower cost policy, called a Preferred Risk Policies (PRPs).

The truth is, floods commonly occur outside of high-risk zones, and your regular insurance will not cover this type of water damage, so getting a policy to protect you is a smart financial investment.

#3: It's Required for Mortgages in High-Risk Areas

If you purchase a home in a high-risk area, you will also have to purchase a flood insurance policy. This is actually a requirement for mortgage lenders that is backed by a federal bill. Some mortgage lenders, on their own, required this type of coverage even if you don't live in a high-risk area, but live in a moderate-risk area as well.

#4: Premium Costs Will Depend on the Various Factors

The cost of a premium will depend upon various factors. A few of the major factors are the value of your property and the value of the policy that you purchase. For example, your property could be worth $250,000, but you only purchase a policy that will cover $50,000 in damages or you could purchase a policy that covers $250,000 in damages. The great the amount of coverage, generally the higher the cost.

Additionally, you can pay to just cover the structure of your home, or you can pay to cover the contents of your home. If you just pay to cover the structure, all your personal belongings, such as your furniture, electronics, and clothing, would not be covered under your policy. You have to purchase a policy that covers both the structure of your home as well as your personal belongings.

Flood insurance is not that expensive and is a worthwhile investment even if you don't live in a high-risk zone, as this type of water damage can easily climb up into the tens of thousands of dollars. Talk to your insurance agent to see if they offer flood insurance policies.