Is Flood Insurance Required?

Did you know that floods in the US cause more than $4.6 billion worth of damage every year? Flooding can cause serious damage to personal property and leaves thousands of people without a roof over their heads.

Some government schemes are in place to help cover the cost of flood damage. However, these can take months to access and won't always cover the full cost of repairing your property. 

More than 15 million homes in the US are at risk of flooding right now. Because of this, there has never been a better time to take out home flood insurance.

So when is flood insurance required and what sort of coverage do you need for your property? Read on to find out more. 

What is Flood Insurance? 

Flood insurance policies protect properties in at-risk areas across the US. They provide specific coverage for losses and structural damage caused by flooding. 

These are stand-alone policies. They offer more comprehensive coverage than home insurance add-ons or hazard insurance. They will cover all instances of flooding, such as hurricane flooding or burst water mains. 

This is particularly important as any flooding can cause serious structural damage. Repairing these structural issues can be incredibly expensive and time-consuming.

In some cases, you may even have to rebuild your home or business. During this time, you'll also have to cover the cost of alternative accommodation or business premises.

As with all insurance policies, you pay a premium to qualify for a set amount of flood coverage. So, if the worst does happen, all you need to do is pay the excess and your insurer will cover the rest of your costs.

When Is Flood Insurance Required? 

Federal law requires some homeowners to have flood insurance coverage. This includes anyone who has bought a property in a high-risk flood area using: 

• Government-issued financing 
• Government-backed financing 

If you have a private mortgage, your lender may also ask you to buy flood insurance. This requirement will be listed in your mortgage terms. Lenders can include this rule even if you don't live in a high-risk flood area. 

However, you can buy flood insurance for any property in the US. So even if you live in a moderate or low-risk area you can take out a policy. In that case, your insurance premiums will be lower.

Different Kinds of Flood Insurance Coverage 

There are two main types of flood insurance: national insurance and private insurance. Once you know which policies you qualify for, you can decide how much coverage you need.

National Flood Insurance Program 

The National Flood Insurance Program (NFIP) is government-backed. This covers major flood damage and sewer backup damage. It is available to people living in high-risk flooding areas.

Over 20,000 communities qualify for NFIP across America. Homeowners, business owners, and renters can apply for this insurance through FEMA.

This costs between $800 and $1,200 per year and provides up to $250,000 of insurance.

Standard NFIP doesn't provide contents coverage or cover damage to swimming pools and decks. It also doesn't cover damage caused by mold and earth movement.

However, you can buy extra content and building coverage from NFIP or a private insurer.

Private Flood Insurance 

You can buy flood insurance from private companies anywhere in America. These companies: 

• Offer NFIP plans 
• Reinsure NFIP plans
• Provide added coverage on top of NFIP plans 
• Provide comprehensive private flood insurance policies

Private insurance is ideal for anyone who needs more than $250,000 of coverage. 

Private insurers also offer specialist commercial flood insurance. They can tailor your home or business flood insurance plan so it provides the coverage you need. 

Compare Insurance Quotes 

NFIP is a great choice for people living in high-risk areas. However, before taking out a policy you should assess all your options.

If you already have home or business insurance, speak to your provider about additional coverage. They may offer you a great deal on supplemental insurance or extra policies.

Once you have a few quotes you can compare the amount of coverage on offer. This is a great way to find a good deal on your flood insurance policy. 

How Much Flood Insurance Do You Need?

The amount of flood coverage you need from your policy depends a lot on the value of your home.

While flood damage may not always be this extreme, your policy should cover the cost of rebuilding your home. This is the most expensive type of flood damage. So starting with this figure will ensure you're covered no matter the damage to your property.

If your rebuild value is worth less than $250,000 and you qualify for the NFIP you can use this. If your home is worth over $250,000, you may need to use a private insurer. 

You can simplify things by getting all your coverage from a private insurer. However, if you still want to use the NFIP, you can take out two insurance policies.

In that case, the NFIP will cover the majority of your home's value. Then you can take out private flood insurance to cover the remaining value.

Take Out a Flood Insurance Policy Today 

So is flood insurance required everywhere in America? The short answer is no. If you live in a high-risk area or your mortgage lender requires it then you must invest in flood coverage. 

However, the risk of flooding across the US is rising and this can cause hundreds of thousands of dollars worth of damage. So even if it isn't a legal requirement, it's definitely worth taking out a policy. This is a great way to protect the investment you've made in your property. 

Are you looking for more ways to protect and get the most out of your financial investments? Then continue reading through our blog today!