3 Common Misconceptions About Flood Insurance
Are you covered if a severe flood hits your front room? What about a nearby creek that creeps onto your property and into your basement?
According to FloodSmart.gov, floods are the “most common natural disaster in the United States.” In high-risk areas, there is a 1-in-4 chance of flooding during a 30-year mortgage.
Even so, “losses due to flooding are not covered under typical homeowner’s and business insurance policies,” according FloodSmart.gov.
Experts say don’t wait for a flood warning to find out whether or not you’re insured for flooding.
Here are three common mistakes you can avoid when it comes to flood insurance.
Mistake No. 1: Floods Won’t Affect You
Flood insurance is legally required in connection with most financing of homes in designated FEMA flood zones. However, all residents, including renters, can also choose to get insured. Policies are generally purchased from the National Flood Insurance Program (NFIP) and sometimes from a private insurer.
While not everyone lives in a flood zone, you should understand how prone your location is to floods, and weigh the pros and cons of a flood policy carefully. “People far away from the ocean may think they can breathe a sigh of relief,” says Michael Barry, vice president at the Insurance Information Institute. “The truth is, floods can happen in places that you might not expect.”
If you live in an area that experiences heavy snow, where rapid melting could flood your home or if you live near a creek that runs down a steep hill, flooding could impact you. More than 20 percent of flood claims submitted to NFIP come from low- to moderate-risk areas, where insurance is not required by law.
Mistake No. 2: Waiting Too Late to Get Flood Insurance
Flood insurance is generally not listed as a covered disaster in homeowners or renters insurance policies, falling into the same category as earthquakes, war, nuclear accidents, and sinkholes. Because new flood policy owners must wait 30 days for their insurance to take effect, the Insurance Information Institute urges people not to wait until flooding is imminent to buy a policy. “We see people all the time who don’t realize they didn’t have flood insurance until it was too late,” says Barry. “At that point, they may be able to receive government aid — but it’s highly unlikely they’ll get enough to cover their losses.”
NFIP’s website offers a tool that conveniently rates your risk, estimates your flood insurance premiums, and helps you find an agent who can further discuss flood insurance with you.
Mistake No. 3: Not Following Industry Changes That Affect Your Policy
In addition to routine flood rezoning and policy coverage changes, large-scale disasters such as Hurricanes Katrina and Sandy have had significant legislative impacts on the insurance industry.
If you don’t stay abreast of congressional debates or routinely check FEMA’s flood maps, the Insurance Information Institute recommends having an annual conversation with your insurance provider to stay informed about everything from legislative and zoning changes to how much your policy covers.
“You never know when changes could happen that affect your policy. It’s not too likely — you may see changes on local news, but it’s best to be safe and touch base with your agent regularly,” says Barry.