Paycheck Chronicles

Do You Need Flood Insurance?


Recent catastrophic flooding in the south may have you wondering, "Do I need flood insurance?"  It's a great question!  Even if you don't live in a flood-prone area, flood insurance may be a good choice.  I asked JJ Montanaro of USAA who should consider flood insurance.  He replied,

"Everyone should at least consider flood insurance. Suffering the type of devastating financial losses that can result from flooding—not even considering the emotional and physical damage—and having no protection in place is tough to think about. It’s been hard to watch on TV, let alone experience first-hand.  You can visit and use the government  tool to assess the risk in your particular area. USAA also has a property risk assessment tool members can use to assess various types of risk for their specific address."

When thinking about your risk and need for coverage, here are some things to consider:

Homeowner's Insurance Does Not Cover Floods

Your regular homeowner's policy does not cover flood damage.  The distinction between damage from flooding can be confusing, and homeowner's policies are not all the same.

One rule of thumb is that the water has been in contact with the ground before it damages your house, it is probably considered flood damage.  Another rule of thumb is that if the water could be considered "rising," then it is probably flood damage.

Water that enters your house from other sources, such as a burst pipe, wind damage to your roof, or hail that breaks a window is considered non-flood water damage.  However, damage that is the result of neglected maintenance, such as clogged gutters or a leaking shower, are not usually covered.  Many policies also do not cover water that backs up from a sewer or drain.  Check your policy to see if you require separate sewer/drain coverage.

Your Mortgage Company Will Require Flood Insurance If You Need It

If your property is located in a high-risk location, then your lender may require you to carry flood insurance on your property.  Just because it isn't required doesn't mean that you don't want coverage.  Over 20% of claims in the National Flood Insurance Program (NFIP) come from properties that are not located in high-risk areas.  My mom suffered extensive, expensive flood damage due to a large rainstorm in suburban Northern Virginia, nowhere near a river or other obvious threat.   If her house could flood, flooding is possible just about anywhere.

As a note, did you know that floods are the most common form of natural disaster? JJ told me that, too.

Prices Vary Dramatically

Most homeowners are eligible for up to $350,000 in coverage ($250,000 property and $100,000 contents) through the NFIP.  While the average NFIP premium is about $700 per year, many people can pay $420 per year or less.

If you require additional coverage, or your property is not eligible for coverage under the NFIP, you will have to obtain flood insurance from a private company.  Rates will vary based upon a wide variety of factors.

Other forms of flood insurance are also available for renters and condo owners.  Members who carry renter's insurance through USAA don't need additional flood insurance, as flood coverage is standard with USAA renter's insurance policies.

If you think there is any possibility that you might want to purchase flood insurance, contact your insurer to get a quote.  You can't make a good decision without knowing the real cost!

You Can't Buy It At The Last Minute

There is typically a 30 day waiting period before a new flood insurance policy becomes effective.  You can't wait until you see a big tropical storm headed your wa y and buy coverage then.

Flood insurance can provide financial compensation in the case of damage due to rising water, even if you don't live in an area that seems risky.  Having all the right information can make it easier to decide whether flood insurance is right for you.

In closing, JJ recommends that you check out, which includes a lot of information and an extensive list of Frequently Asked Questions.

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