It's Hurricane Season. Do You Have Flood Insurance?
Damage by flooding is the most common and most costly type of disaster in the U.S. Just one inch of water throughout a 2,000 square foot home can cause almost $21,000 in damage, according to the National Flood Insurance Program. Yet even though regular homeowners' insurance policies don’t cover flood damage, only one home in ten is covered by a flood insurance policy.
Unless you own your home free and clear of loans, or you live in an apartment or condo on an upstairs floor, your mortgage company may require you to get flood insurance – especially if you live in an area at risk of flooding. But you can purchase it even if you don't live within a flood zone, and that may be a good idea. Some 25 percent of all flood claims are for homes that aren't located in a flood plain. The average price of coverage is about $600 annually, but costs vary widely.
You must get a flood-insurance policy in addition to your homeowner's insurance. The National Flood Insurance Program is the primary source of flood insurance for homeowners and renters, but the insurance can likely be purchased through your homeowners or renters insurance agent. Don't wait until the storm warnings are posted to get it. The coverage isn't effective until 30 days after a policy is issued.
Flood insurance is capped at $250,000, while the contents of your home can be insured only up to $100,000. You may be able to get flood insurance beyond those limits through specialty carriers. The policy pays either the value of your lost property or the cost of replacing up to the limit. The policies insure against physical damage to your home or belongings directly caused by flooding.
Flood insurance has limitations. It won't reimburse you for temporary living expenses while your home is being repaired, a ruined car (a matter for your auto insurance) or damage from moisture or mold that you could have prevented. To learn more about your risks of flood damage and flood insurance, visit www.FloodSmart.gov. There's a tool that will help you determine the risk level of your property and direct you to insurance brokers who can help you get coverage under the National Flood Insurance Program.
Sources: "Got Flood Insurance? You Probably Need It," Terry Sheridan, Bankrate.com.