Ballpark Estimate: Average is just under $600 a year
Damage caused by flooding usually isn’t covered under standard home insurance plans. This means that should you experience any water damage caused by a host of weather conditions or other problems, you could find yourself dealing with extensive repairs without any help to cover the expense.
To Buy or Not
If you live in an area that’s considered a high risk for flooding and have a mortgage that’s regulated or insured by the federal government, you’re probably required to have flooding insurance. But if live in a city or town where flooding is only a low to moderate risk, the choice can be yours as to whether to protect yourself. When the risk for flooding isn’t very high, you may be tempted to forego the insurance, figuring you won’t need it in the end. However, it’s important to know that as many as one-quarter of all flood insurance claims submitted each year come from areas that aren’t considered high risk for flooding conditions. This fact can be enough to make you think again.
Some of the types of problems that can cause flood damage include the following:
- Heavy rain
- Tropical storms
- Flash floods
- Melting snow
- Overflowing levees and dams
While these weather concerns can put everyone at risk for flood damage, certain homes can also be more susceptible to experiencing problems. If your plumbing fixtures and drains are located below street level, when the winter snow melts or heavy rain falls for an extended period of time, your home could be particularly vulnerable. Other risk factors can occur when the sewer backs up, or you experience heavy snow melting that seeps into your home. These situations usually aren’t covered by conventional homeowners insurance but need to be covered under a separate flood insurance plan.
History of Flood Insurance
With so many factors to worry about, your likelihood of experiencing water damage is much higher than the risk of other problems such as fire and theft. As a result, many insurance providers can’t even afford to offer protection for claims that fall within this category. Therefore, to help homeowners weather the risks, in 1968, the federal government established the National Flood Insurance Program (NFIP), which is available for people who live in participating areas. While you can purchase this coverage through close to a hundred private insurers who oversee the details, the rates are standardized based on a number of variables. This makes it possible for people to purchase affordable protection that meets their specific situations.
Cost of Flood Damage
If you’re still not sure you need this protection, consider this fact: two inches of water in your home can cost an average of $7,800 in damage, according to FloodSmart.gov. This website offers an interactive tool that you can use to determine the cost of different levels of water damage. Further, the experts say flood claims over the past decade have been in the range of $30,000 plus. This is a heavy expense to bear, especially when you weigh it against the cost to protect your home from flood problems.
Whether your neighborhood falls into a high or moderate/ low risk area for flooding (as determined by the federal government, which designates the zones accordingly), this will be an important consideration when it comes to what you can expect to pay to purchase a flood insurance plan. But keep in mind that your area’s status is only one factor that’s weighed into the overall cost. The type of dwelling, either home, condo or apartment, and whether you own it or rent it, also come into play in the cost of your premiums.
In addition, how much protection you want, what items you want covered and what type of deductible you will have all factor into the equation. Therefore, it’s important to sit down and talk to an insurance agent and find out what is the best approach for your specific situation.
Finally, the age of your home, the elevation of the structure, and even what state you reside in can also affect your likelihood for damage and therefore what costs you could incur should a storm or other natural disaster strike.
If you want to purchase a flood insurance plan, it’s also important to think ahead, because most flood insurance policies take a month before they go into effect. This means that you can’t listen to a stormy weather forecast and suddenly decide you need coverage right away.
When you invest in flood insurance, it can be helpful to know what you get in return. Your home structure and foundation should be covered, as well as your electrical system, plumbing, heating and cooling systems, appliances, installed carpeting and built-in cabinets. Many of your personal belongings should also be covered, such as clothing, electronics, artwork and other valuables. Outdoor belongings, including patios, decks, pools, fences and cars are typically not covered. In addition, basement areas are only covered in a very limited way.
What It Costs
With so many details to take into account, you may wonder what all this means to your wallet. A lot depends on what where you live and what you want. For instance, how high risk the area in which you live is will affect the cost of your insurance. In addition, you need to decide if you want to insure both your building and your contents, or just the building, or just the contents, alone. The amount of coverage you want will also make a big difference. (Homeowners have the choice to cover their building for up to $250,000, which is the maximum amount offered.) In addition, different communities qualify for different rate options, which will affect the coverage and the price.
To give you a general idea of how all this plays out, consider a few different possible scenarios. For instance, if you live in a low-risk area and meet specified criteria that allows you to qualify for a special “preferred risk” plan, premiums start at $120 a year for the lowest amount of coverage for your structure and your belongings, and can go up as high as $400. If you don’t qualify for this special plan, though, the standard low risk rate ranges from $425 to $1,500 for your building and contents.
If you live in a high-risk area, the price range jumps to between $475 and $2,700 for everything. The deductibles for these policies can be in the $500 to $1,000 range or even higher.
If you want to cover your contents only, but not the actual structure, you can expect to spend anywhere from $40 to $1,000 depending on the value of your belongings and your risk level.
The Ups And Downs
While this federal flood insurance is very valuable for homeowners, it’s important to note that in recent months the program has come up for authorization by Congress and has been allowed to lapse several times. In fact, as of the end of March 2010, the program is currently expired and has not yet been renewed. For people currently on the plan, their coverage shouldn’t be affected by this hiatus. But for people who are buying homes in high risk flooding areas, they will be unable to purchase a new plan, and this can delay their closings since they may be required to have proof of flood insurance as a financing condition. Hopefully this issue will be resolved soon.
A Private Option
In addition to the federally run flood insurance program, in the past few years, a few insurance companies have been offering a private flood insurance option for existing clients in low-risk areas who live in high-end homes. While the higher coverage can be important for residences that cost considerably more than the $250,000 maximum offered through the federal plan, this comes at an increased cost, too. In general, private some agents say that these private options can be about double the cost of buying a government-sponsored plan.