Flood Insurance Secret – Your Homeowners Insurance Probably Doesn’t Cover You!

You may be taking a huge financial risk if you haven’t checked to make sure that you have proper insurance coverage. It’s not automatic!

Flood insurance is important because most homeowners insurance policies do NOT cover flood damage. In fact, most standard homeowners, renters, dwelling, and condominium policies contain specific clauses that exclude and reject any type of flood losses. These days many lenders will require you to make certain that your property is fully protected before they will fund your loan, but existing owners should check with their insurance agents to determine whether their current policies cover them for flood damage.

Congress created the National Flood Insurance Program (NFIP) in 1968 to fill the coverage gap contained in most property policies. Flood policies are available in communities nationwide. These programs meet federal standards and help minimize property losses.

Many people think that they only need flood insurance if they live near the water, but those living close to the coast, a lake, river, or similar low-lying area, aren’t the only ones at risk. The National Flood Insurance Program (NFIP) says that one of every three claims comes from outside the high-risk flood areas. An overflowing drain or rainfall that overwhelms the drainage around your house can send rising waters into your home.

Tip: It’s important to think ahead and buy before you need it. A flood policy takes effect 30 days after you buy it. Don’t wait until it’s too late.

A flood policy covers the insured home, building and its contents. The policy also pays for moving insured contents to a safe location and for expenses — such as pumps and sandbags — to protect a building.

Even though flood insurance is a federal program, you can buy flood insurance from the same local agent who handles your home or auto insurance policy.

The price of flood insurance depends on where you live and the amount of coverage needed. If you live in an area with low to moderate risk of flooding, you might be able to buy an NFIP “preferred risk policy” cheap.

Be sure to buy enough coverage. You can insure your home for as much as $250,000 and your personal property for as much as $100,000. Commercial buildings can be insured for as much as $500,000, with another $500,000 for contents.

If your home is covered for at least 80 percent of its value, you will have replacement cost coverage on the structure. In English this means the policy will pay for repairs with no deduction for depreciation. Contents coverage, on the other hand, is on an actual cash value-that is, depreciated-basis.

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