Why buy flood insurance?
Floods are the most common weather emergency in the U.S., according to FEMA, and they usually strike without warning. Flooding can result from hurricanes, tropical storms, cyclones, plain old heavy rains, winter storms, spring thaws, overburdened or clogged drainage systems, or occasionally from nearby construction. The increased development of buildings, parking lots, and roads has made flooding more severe throughout the country, FEMA says.
You can live miles away from water and still be a victim of flooding. It takes only a few inches of floodwater to cause tens of thousands of dollars in damage, according to FEMA.
And don’t assume that federal disaster assistance will bail you out when there’s a flood. It’s helpful to homeowners only when the U.S. president declares a state of emergency—and is usually a loan that must be repaid with interest, FEMA notes. Flood insurance policies pay out on qualifying claims whether or not a federal disaster is declared.
What kind of risks am I running?
High-risk flood zones: Insurance required
People buying homes in certain designated flood hazard areas are required by FEMA to purchase flood insurance before getting a home loan from federally regulated or insured lenders. High-risk areas are those declared to have at least a 25% chance of flooding during the typical 30-year mortgage. FEMA estimates there are about 30 million structures, both residential and commercial, in that position nationwide. There’s less risk of a structural fire in your home, Schein notes (about 10%, over a 30-year mortgage), yet no one questions the need for fire insurance. You can find out if you’re in a flood zone or get a full breakdown of high-risk subcategories.
Low- to moderate-risk flood zones: Still recommended
Homeowners who aren’t close to a body of water may still want to consider buying flood insurance. About 25% to 30% of flood insurance claims come from areas that have less than a 1% annual chance of flooding, according to FEMA. The agency still recommends flood insurance in these low- to medium-risk areas, and in fact homeowners and businesses there might be eligible for a lower-cost preferred risk policy.
You can find out your property’s level of risk at FloodSmart.gov. This can help you assess your potential flood insurance premium.
How to get insurance and what it’ll cost you
Flood insurance is available in more than 22,000 communities that participate in the National Flood Insurance Program, created more than 45 years ago. The program requires certain flood plain management initiatives in high-hazard areas. However, it also offers policies outside of flood plains, whether or not your property has flooded before.
“What we’re hearing from our offices in Texas is that a lot of people who had major damage are quite far outside the mapped flood area,” Schein says, adding that it’s not terribly unusual. “We hear heartbreaking stories all the time. We hear, ‘My insurance agent told me I don’t need it.’ What the agent should have said, or meant to say, is: ‘The bank is probably not going to require it.’ That’s not the same thing.”