Flood insurance is a type of property insurance that provides coverage in the event of flood that causes damage to your home or property. Many homeowners, mistakenly, believe that their homeowners insurance plan covers flood damage. You should know that homeowners’ policies do not cover damages caused by flood. You have to buy a separate policy to protect yourself against damages caused by flood. According to statistics 75% of the buildings in the U.S.A. located in areas with a high risk of flood are not covered by the flood insurance.
This policy is available for homeowners, renters and businesses whose communities participate in the National Flood Insurance Program of federal government. You can buy a flood insurance policy from any property insurance company (ie. Greene-Niesen Insurance) licensed to write flood insurance under arrangements with the Federal Insurance Administration.
Although flood insurance can be bought at any time, usually a four weeks period is required between the time you purchase flood insurance policy and the time it goes into effect. This means that you cannot listen to a stormy weather forecast and immediately decide to buy flood insurance policy right away. This waiting period is not required if the purchase is in connection with the making, increasing, extending or renewing of a loan.
Usually, coverage available under flood insurance policy includes building coverage, contents coverage and replacement cost coverage.
Building Coverage: Protects the structure of the home or business. The structure includes above ground appliances and other items which are considered to be part of the building, such as, air conditioners, built-in dishwashers, elevator equipment, light fixtures, hot water heaters etc.
Contents coverage: Includes coverage for clothing and furniture, portable dishwashers and portable microwaves, clothe washers and dryers, carpets not permanently installed etc.
Contents coverage is important because flood claims data confirms that 60% of the contents of a house are destroyed by flood. Flood can cause more damage to the contents than damage to the building itself. The contents of your building help make your house a home. Therefore, you would not want to risk losing them in the event of flood.
Buying a flood insurance policy is advised even if you do not live in an area which is prone to flood. Statistics show that between 20% to 25% claims come from high-flood-risk areas.
Annual premiums for flood insurance on a single-family one-story home usually range from about $400 to $450. In low risk areas the cost can be as low as $100 annually but in the high risk area they can cost more than $2,000. Additional costs may need to be incurred if structural replacement costs are more than $250,000. Residential flood insurance covers up to this amount only.