If your home has never been in an officially designated flood zone, it may be now, as flood zone maps were recently modified by the Federal Emergency Management Agency (FEMA). Couple these changes with recent devastating flood events like those along the Mississippi River, and it has never been a better time to review your flood insurance policy or establish a new one.
Flood Claims
Even if you live in a relatively low-risk area for flooding, you may want to consider taking out a flood insurance policy. According to The National Flood Insurance Program, 25 percent of flood claims made in 2010 were by policy holders on properties that were NOT in high-risk areas.
Flood insurance policies start at $129 per year, but the national average for a policy is $600 a year, according to FEMA. Paying hundreds more a year on insurance may not seem practical, but if you weigh the costs against the average flood claim of $48,000, you may think twice. Paying for a flood insurance policy is a relatively small price to pay to protect your home and belongings from flood water damages.
Cost of Damages
Several factors go into calculating the cost of the damages a home and property sustain from flood waters. Floodsmart.gov shares some estimates on the damage costs on a 2,000 square-foot home, based on how high the flood waters rise:
- Six inches of water: $39,150
- One foot of water: $52,220
- Two feet of water: $62,880
- Three feet of water: $68,100
- Four feet of water: $74,580
Keep in mind, however, that these costs can vary from state to state and from home to home.
Evaluating a Flood Policy
When talking with your insurance agent or a potential insurance provider, here are a few things you’ll want to find out:
1. What exactly does the policy cover and what does it NOT cover? For example, if the sewer in your home backs up, a flood policy does not typically cover flooding of this kind. An exception to this is if the sewer backup was directly related to flooding in your area.
2. What’s the ideal deductible for you? As is the case with most insurance policies, the higher the deductible on a flood policy, the lower the premium and vice versa. You should find the most affordable premium-deductible combination. Remember that you are responsible for paying the deductible in the case of a flood claim, while the policy will pay the amount of damages above the deductible.
3. Is there a waiting period? Waiting periods are another factor you need to check into when establishing a policy. The standard flood policy requires a 30-day waiting period from the date of purchase on a new flood policy before the home is covered. This means that if a flood claim is made from an event that occurs within the first 30 days of having the policy, the claim will be denied and damages will not be covered.
4. Do you have to pay up-front for the policy? Flood policy insurance companies typically require you to pay the policy premium in full. Some agencies and insurance companies are willing to make payment arrangements with you, but find this out up front, so you can establish a policy that you can afford to pay.
If your home is in an area where flooding is even a remote possibility, it’s smart to at least weigh the pros and cons of taking out a flood insurance policy. While a policy means spending hundreds more a year, the cost is minimal compared to covering the entire costs to repair a home devastated by flood waters. As is the case with any insurance, make sure you shop around and understand the policy you are taking out.
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