The Facts on Flood Insurance

The Facts on Flood Insurance

April 05, 2022
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Do you ever wonder whether you should worry about flooding? Well, consider that more than 20% of flood claims come from properties outside high-risk flood zones, according to the Federal Emergency Management Agency (FEMA). You certainly don’t have to live in a coastal area to be affected by flooding. Anyone who owns a home near a body of water, including lakes and streams, is vulnerable.

In addition, if your community is experiencing overbuilding, dealing with an antiquated sewer system or has severe weather, you’re also at an increased risk of flooding. Floods are the nation’s most common and costly natural disaster, causing millions of dollars in damage annually.

How can you lessen your risk? Flood insurance is a particularly valuable option, especially because homeowners and renters policies typically do not cover flood damage.

A smart choice

It doesn’t take a national disaster declaration for flood insurance to be used. When you consider that just 1 inch of water in your home could cost more than $27,000 in damages, according to FEMA, the benefit of having flood insurance is well worth the cost of the policy.

What exactly is flood insurance? It’s a special policy that is federally backed by the National Flood Insurance Program (NFIP), a program created when the National Flood Insurance Act of 1968 was passed. NFIP provides affordable insurance to property owners, renters and businesses, and is designed to reduce the socio-economic impact of disasters. What’s more, many private insurance companies have entered the market in recent years, so there are other options for obtaining flood coverage besides the NFIP. And some insurance companies even offer greater coverage than NFIP for about the same cost.

What the NFIP covers

NFIP policies cover damage from overflow of inland or tidal water, unusual and rapid accumulation or runoff of surface waters from any source and mudflow. Simply put, direct physical damage to your home or your belongings as a result of a flood is covered. For example, damages caused by a sewer backup are covered if the backup is a direct result of flooding. If, however, it’s caused by another problem, the damages are not covered.

How to buy flood insurance

To purchase flood insurance through the NFIP, contact your insurance professional, as you cannot buy flood insurance directly from the NFIP. Keep in mind that NFIP flood insurance rates don’t differ from company to company or agent to agent.

Here are 10 important questions to ask about flood insurance.

1. Does my community participate in the National Flood Insurance Program? Flood insurance from the NFIP is only available in participating communities, but most communities do participate. Your insurance professional can tell you if your state and community participate.

2. Do I qualify for a Preferred Risk Policy? Preferred Risk Policy (PRP) is a Standard Flood Insurance Policy (SFIP) that offers low-cost coverage to owners and tenants of eligible buildings located in certain moderate-risk zones in the National Flood Insurance Program.

3. What flood zone do I live in? What is my property's flood risk?

4. Is flood insurance mandatory for my property? Will the lender require it?

5. Will the federal government back my flood insurance policy?

6. How much coverage should I get for my home/building and for my belongings?

7. How can I reduce the cost of my flood insurance?

8. Are there additional expenses or agency fees?

9. Will my policy provide Replacement Cost Value or Actual Cash Value? Actual Cash Value is equal to the replacement cost minus any depreciation (ACV = replacement cost - depreciation).

10. Who should I call if I have a flood claim?

When shopping around for flood insurance, your insurance professional can point you in the right direction. Flood insurance is an absolute must if you live near a body of water. Even if you don’t, it’s still an important safeguard, as heavy rains, overbuilding and outdated sewer systems can make flooding a problem just about anywhere. Flood insurance is a smart option to protect against financial damage to your home and valuables.

Blue Ridge Risk Partners is a top 75 independent insurance agency in the United States. With 21 offices through Maryland, Pennsylvania, and West Virginia and access to hundreds of carriers, we are able to meet your unique insurance needs.