In order to provide peace of mind and financial protection from losses resulting from flooding, there is a specific insurance policy coverage called flood insurance. The factor of risk for any property is determined by a professional’s review of regional topographical maps that illustrate the areas prone to flooding. If you’re home lies in a floodplain, on a lowland, or in a floodway, than flood insurance would be a wise choice.
Interestingly, just 20% of American homes at risk of potential flooding actually have this kind of insurance. It is important to note that many private insurers do not offer this kind of insurance due to the high cost and risks associated with flooding. This is known in the business of insurance as “adverse selection”, which refers to the purchase of policies by individuals who are most likely to be affected by potential flooding.
However, the government has stepped in to ensure that those who are risk of flooding can somehow purchase a flood policy. Flood insurance is offered as a part of the National Flood Insurance Program (NFIP), which is administered by the governmental agency known as FEMA. Contact your local Insurance agent for more information. Generally, agents who represent insurance companies are able to sell these policies in regions that are involved in the NFIP. These flood prone areas must adhere to certain governmental guidelines in order to be a part of the program. A few companies do offer this kind of insurance independently, but the policy premiums are very expensive.
NFIP insurance coverage provides amounts up to $250,000 for flood damage that occurs to one’s home and coverage up to $100,000 for one’s personal belongings within the home. It is good to keep in mind that in many regions of the US, this amount of coverage may actually be insufficient for damages and potential loss. To make up this gap between NFIP coverage limits and a home’s true value, homeowners can purchase additional coverage that is referred to as “excess coverage”. When in consideration of purchasing this extra coverage, a homeowner should make his or her self very familiar with their NFIP policy to help decide what one’s extra needs might be. For example, if you have a main structure plus an additional building on your property, you would need to be sure that your policy covers that building plus any detached garages, a pool, or, should your personal property be extraordinarily valuable, the additional value therein, like expensive artwork for example. It is important that one be familiarized with one’s needs; the policy choices one can make will make a huge difference.
There are two kinds of basic policy coverage for flood insurance. There is structure coverage and content coverage. Structure coverage only protects one from damage to a home’s structure, such as floors, doors, walls, windows, etc. Content coverage only provides coverage for items within a home, such as art work, clothing, and furniture.