Guide to Flood Insurance when Buying

There are ample reasons people seek out a lifestyle near the water or in a waterfront home. One of the drawbacks, however, is the required flood insurance for homes in flood zones. When you’re buying a house, it’s important to know whether or not the property you’re buying is in a flood zone. FEMA, the Federal Emergency Management Agency, manages and updates maps of designated flood zones. FEMA considers location and elevation in determining flood zone areas. Houses in areas deemed flood zones require flood insurance. Here are ten things you need to know about flood insurance when buying.

Homeowners Insurance Doesn’t Cover It

You may be surprised to learn what your homeowner’s insurance policy doesn’t cover. While a homeowner’s insurance policy may cover small incidental water damage such as a broken pipe or overflowing toilet, it doesn’t cover flood damage. If you don’t opt in for a flood insurance policy and you find your house literally under water, you’re left holding the burden of repairs on your own. This flood risk is why many homeowners choose to add a flood insurance policy on top of their homeowner’s policy, even if they don’t live in flood zones. Remember, Mother Nature is not responsible for all floods. Broken water lines, breached dams, and other human-made accidents can also cause flooding – even for homes situated inland.

When Flood Insurance Isn’t Optional

While some homeowners voluntarily opt in for flood insurance, it’s not always optional. In fact, when a lender agrees to loan you the funds for your real estate purchase through a home mortgage loan, the lender wants to protect their investment, too. Not only does the bank want to protect their investment, but the law requires lenders to make flood insurance mandatory when a home is in a high-risk flood zone.

Not All Flood Zones Are Equal

FEMA defines flood zones according to various risk levels. The higher the risk level, the more coverage needed, and the higher the payments will be. The Flood Insurance Act of 1968 launched the National Flood Insurance Program (NFIP), making flood insurance mandatory in certain areas. At one point, the requirement of flood insurance caused premiums to skyrocket, creating financial hardship for homeowners forced to have policies. The Homeowner Flood Insurance Affordability Act of 2014 repealed portions of the previous laws to protect homeowners from exorbitantly increasing premiums and rates.

Your flood insurance premiums are based on the lifespan of your loan, and the risk factor involved in the location of the house. Before you put in an offer on the property, talk with your lender, your insurance provider, and your real estate agent to get a firm understanding of what you’ll pay for flood insurance.

When Flood Insurance Leaves You High and Dry

Flood insurance may be required by law, may be required by lenders, and may offer you comfort in know you’ve got coverage. There are scenarios in which flood insurance covers the costs of damage and repairs, but not always. In some cases, your flood insurance could leave you high and dry, and not in a good way.

Your flood insurance policy will not cover your property for the first 30 days. In other words, if your new house is subject to a hurricane 28 days after you’ve moved in, you’re out of luck. That’s not covered. Anything above and beyond the policy’s limits won’t be covered, either. Furthermore, finished basements, landscaping, and exterior features are not protected under the umbrella of flood insurance. Vehicles aren’t covered either, nor is currency, documents, or precious metals.

Why It’s Not Just the Flood Zone’s Problem

According to NFIP, floods are the nation’s most common natural disaster, accounting for $3.5 billion annually for flood insurance claims. Furthermore, NFIP also states that each of the 50 states has experienced floods or flash floods in the past five years. For this reason, even if you’re not in a high-risk flood zone, you may find benefit in having a flood insurance policy.

Flood Insurance Coverage Options

Just as there’s no blanket fee for flood insurance, there are a variety of policies to choose from – not just a standard one-size-fits-all policy. You can have just the structure covered, the structure and the contents, and other options that can not only influence your monthly premiums, but have a significant impact on your bottom dollar in the event of a flood emergency. There are also products and systems you can implement to help safeguard your home and your property in flood situations.

Transfer of Flood Insurance

In some cases, a seller’s flood insurance policy can be transferred to the new owner, provided the forms are submitted and completed prior to close of sale on the property.

Where to Buy Flood Insurance

You can purchase flood insurance through any insurance agent. In communities participating in the National Flood Insurance Program, you can contact NFIP for referrals. However, you cannot purchase flood insurance directly from NFIP.

Disaster Assistance Isn’t All It’s Cracked Up to Be

Disaster assistance isn’t always available, might not be available in a timely fashion, and may arrive in the form of a loan that you must repay. You cannot rely on disaster assistance.

Return on Investment

Yes, you may be required to pay monthly premiums for flood insurance. Although you may feel slighted by a requirement to have flood insurance, you’ll feel a great sense of relief if you ever have to file a claim. You’ll get more back than you put in, especially in comparison to the costs you’d pay for repairs if uninsured. It’s worth it.

Prevention, Preparation, and Planning

Take advantage of products and systems designed to minimize the effects of floods. Keep all of your insurance paperwork and important documents in a waterproof safe. Have a plan to evacuate a flood situation safely with your loved ones. Flood insurance does not cover living expenses during repairs, or money lost from missed work. Have an emergency fund to supplement your flood insurance.

Your real estate agent is the best source of information about the local community and real estate topics. Give Cyndee & Jack Haydon a call today at 727-710-8036 to learn more about local areas, discuss selling a house, or tour available homes for sale.

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