Is flood insurance worth it?
Regular howeowner’s insurance policies do not cover damage from floods. The average flood damage claim in the U.S., according to the National Flood Insurance Program, is about $30,000.
A flood is designated as an overflow of inland or tidal waters, unusual and rapid accumulation or runoff of surface waters, mudflow, or collapse or subsidence of land along the short of a body of water as a result of erosion or undermining caused by water exceeding anticipated cyclical levels that result in a flood. In other, less technical words, a flood is an excess of water or mud on land that is typically dry. This could be as little as one inch of water, which can cause serious and costly damage to your home and its contents.
If you live in a “flood plain,” an area of low-lying ground close to a body of water, your mortgage company will most likely require you to purchase flood insurance. It’s typically cheaper in non-flood zones, but you don’t have to live in one to buy it – about 1 in 4 flood damage claims aren’t in flood plains. Flood plains and their maps are constantly changing, so it’s important to stay up-to-date on your risk. Check out FloodSmart.gov and insert your address to see if you’re in a flood plain.
Federal flood insurance programs max out at $250,000 for structural damage, and another $100,000 for personal possessions – but you must ASK for coverage on possessions, and it will have an additional cost. If your home or possessions are worth more than that, and the flood damage results in a total loss, you’ll only get recouped the amount of the policy. It will cover the cost to rebuild, and only current value on possessions. It doesn’t cover the basement, and it doesn’t cover the cost of relocation while you rebuild. You can purchase excess coverage through private carriers if your home and possessions are worth more than the national limits, which are more likely to cover relocation costs.
There is a 30-day waiting period from when you buy flood insurance and coverage kicks in, so you’ll need to plan ahead – you can’t buy a policy after the flood damage has occurred.
The average cost is about $600 a year for flood insurance. So is it worth it? For many people, our homes are our most valuable possessions, and they’re worth protecting. $600 a year is a small amount to pay for the peace of mind that you’ll have if your home is damaged by a flood.