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If you live where it rains, you live where it can flood. A flood is defined as the rising of a body of water and its overflowing onto normally dry land. For insurance companies, that definition is further refined to a condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow. Floods can happen for any number of reasons. Here are a few examples:
- Extended periods of rainfall
- Large storms such as hurricanes
Even if you have never experienced a flood, you may do so in the future. Flood risk is calculated according to history combined with other factors such as rainfall, surge data for local bodies of water, elevation and development related changes.
Areas are divided into the following for insurance purposes:
High risk
High risk areas have at least a one percent chance of flooding annually. This adds up to a risk of 26 percent over the course of a 30-year mortgage. Insurers in these areas will require flood insurance on all mortagaged homes.
Moderate risk
In moderate risk areas, the risk of being flooded is lower than that of high risk areas, meaning less than a one percent chance of flooding annually. For homes in these areas, flood insurance is not required, but it is highly recommended for both homeowners and renters.
Low risk
In low risk areas, the annual risk of flooding is minimal, but still exists. As with moderate risk areas, homeowners are not required to carry flood insurance, but it is recommended.
Undetermined risk
If you live in an area where no flood risk analysis has been done, you are in the undetermined risk category. However, this does not mean you face no risk of flooding, so flood insurance is recommended. These areas tend to have similar premiums as high risk areas.
Even if you live in a low risk area, you are not immune to flooding. Should you suffer a flood of your home, your standard homeowners insurance policy is unlikely to cover the flood related damage. This is because flood insurance is a separate type of coverage altogether.
Floods do not always arise out of natural events. They can result from burst pipes or other construction related flaws. Water damage can result in structural damage, mold and other expensive to repair problems. In this way, flood insurance provides you with a sense of security.
When should you not have flood insurance?
The only time a person does not need to consider carrying flood insurance is when they live above ground level. For instance, someone living on the fourth floor of a high-rise condominium would not need flood coverage.
The best way to find out if flood insurance makes sense for you is to speak to a qualified agent in your area. These agents will have up to date flood risk maps and figures to help you determine what coverage, if any, will work best. |
