Flood Insurance, Why everyone should carry this coverage

How many times have you watched the news, to see complete devastation from raging flood waters, and think to yourself, that can never happen to your home? You know, the aerial views of just the rooftops of endless homes, submerged in nothing but muddy water?  You justify your thoughts with statements such as “ I do not live in a flood zone”, or “ I do not live near the ocean, bay or river”.

I think we are all feeling a little uneasy lately, as this is getting too close to home. Understand that every lot has a designated flood zone. What matters is the flood zone where the lot is located.  Flood Zones are land areas identified by the Federal Emergency Management Agency (FEMA). The Army Corp of Engineers periodically review flood prone areas and revise the flood maps. Meaning, at one time your residence could have been in a low to moderate risk flood zone ( in insurance terms means a  Flood Zone B,C, or X) but due to a map revision, is now more susceptible to flood, or in a high risk flood zone, known as the Flood Zone A, areas.  Flood Zones can change due to new land development, especially if construction changes the natural runoff paths.

The National Flood Insurance Program (NFIP) has an arrangement with private insurance companies to sell and service flood insurance policies. Since Flood insurance is a Federal Funded Program, the cost of the insurance is not negotiable.  The cost of flood insurance in a Flood Zone that has been determined to be in a low to moderate risk area, would be as follows, as of 9/7/2011:

Home with a basement
$250,000 of building coverage
$100,000 of contents coverage
$1,000 deductible
Total Annual Premium – $405

Home without a basement
$250,000 of building coverage
$100,000 of contents coverage
$1,000 deductible
Total Annual Premium – $365

All flood insurance policies have a  30 day waiting period and must be paid in full. There are exceptions to the waiting period, and that is if Flood insurance is required by the mortgage company, by either going to settlement or doing a refinance.  Another point worth mentioning is, insurance companies such as ACE, Fireman’s Fund and Chubb, to name a few, have a flood insurance endorsement, which can be added to their homeowners policy. This product affords the company a little more flexibility, is not funded by the government, and therefore the coverage can be broader in terms.  These companies will only add the flood endorsement in certain flood zones (B,C and X, which are the low to moderate risk areas).

We welcome any questions you may have regarding flood insurance, or any other concerns with respect to your personal insurance needs.

Jayne Shaw
Insurance Consultant

(1)     http://www.floodsmart.gov/floodsmart/pages/index.jsp