I’ve been lucky. I’ve never lived in a place where my mortgage lender required flood insurance and my only face-to-face encounter with a flood was of the self-induced variety. The lesson I learned: a drain cover with thin openings may look good, but will create a problem in a place where leaves tend to gather.
So, while I’ve been lucky to this point, there could be a flood in all of our futures. According to the government, floods are the most common and most costly natural disaster.
Here are five things you should understand about flood insurance as you look to protect your wallet and your property:
- It’s not part of regular homeowner’s coverage. You may be able to buy the coverage (a separate policy) through your insurance company or another company that has an arrangement with the National Flood Insurance Program. Some private companies offer coverage outside the NFIP and you may need to go that route if the coverage offered through the government program is not adequate or the price is not competitive.
- It’s not too expensive. According to the feds, the average premium is about $650 per year. Compare that figure to the potential losses stemming from flood damage and you have a case study on insurance and risk management.
- You don’t have to be in the flood plain to be vulnerable. According to the Federal Emergency Management Agency, a surprising 25% of flood claims come from low- to moderate-risk areas. The type of areas where lenders do not require you to purchase flood insurance—and where most of us live.
- There are limits. As far as insurance goes the NFIP is pretty straightforward. You can cover your residence up to $250,000 and contents up to $100,000. For additional coverage, talk to your insurer.
- You can’t wait until flooding is in the forecast. Typically, there’s a 30-day waiting period before the policy is effective.