UNDERSTANDING FLOOD INSURANCE

 "Just a few inches of water from a flood can cause thousands of dollars in damage," according to the National Flood Insurance Program.

Here are a few key takeaways to help you understand flood insurance and the need for the protection it provides.

1. Flood insurance protects you and your lender. If you purchase a home in a federally designated high-risk flood zone* or floodplain, most lenders will require you to purchase Flood Insurance not only to protect your interest but theirs also.  

"A mortgage lender has a financial interest to protect the property value in the event of a catastrophic flood loss, especially if that home is located in an area a higher risk for flooding, " according to Kyle Herring at All American Public Adjusters in Austin, Texas. 

2. Flood insurance is a separate policy from homeowners insurance. The hazard insurance section of a standard homeowner's insurance policies does not cover flooding from external natural causes, like heavy rains or man-made disasters, i.e. a dam break.

3. Flood insurance works like other insurance products.  The insured party pays an annual premium based on the property's flood risk and the deductible they choose.  Should the property be damaged or destroyed by flooding, the homeowner receives cash for money required to repair the damage, up to the limits of the policy.  Separate coverage of up to $100,000 for personal property is also available.

4. How do I determine if my property needs flood insurance before I purchase it?  The Federal Emergency Management Agency (FEMA) website - FloodSmart.gov publishes a map showing properties in a high-risk area where flood insurance is required.  You can also check with your mortgage lender and your real estate agent to learn what FEMA Flood Zone you property is located in.  

Knowing if your future home is in a high-risk flood zone is a fact to consider when purchasing.  The additional cost of the flood insurance will increase your monthly mortgage payments. Thoughts to consider as you prepare to buy.

* Check out my November 3, 2019 blog on "How Do I Know If I Need Flood Insurance."