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Flood Insurance 101: An Introduction
By Terry Allen
Flood insurance is not an unheard of concept when it comes to water damage. A responsible, smart homeowner would know that the risk of damage from water will mean that there is a need to secure the property with insurance. Because water damage can occur at any time, it is best to consider flood insurance as a requirement, not an option.
What is flood insurance?
Flood insurance is a policy that includes in its coverage the property as well as the items found within it. What distinguishes this kind of insurance from others is that it is supported by the federal government as well as local communities. The involved parties are not just private insurance companies.
Another factor that differentiates flood insurance is that it is regulated by a specific organization. Called the National Flood Insurance Program (NFIP), it was created by Congress in 1968. Its purpose is to allow property owners, as well as those who utilize it, to purchase the insurance needed. The policies are purchased through private companies but are administered by the federal government.
Why is flood insurance important?
It is necessary to obtain flood insurance because flooding occurs more frequently than you may imagine. Among the natural disasters that can happen, flooding is the most common. Thus, it is best to consider it as a very real possibility. Given that, protecting your assets with insurance formulated specifically to address the water damage is needed.
Another reason why flood insurance must be sought is because most homeowner insurance policies do not include damage by floods. It often needs to be specified in order to apply. Also, some areas actually require homeowners to get flood insurance. If the location of your property is prone to flooding, you must purchase a policy before a mortgage loan can be approved.
Homes are often the biggest investments made by a person. With this in mind, it is easy to grasp the significance as to why it needs to be protected by flood insurance.
Can everyone get flood insurance?
There are some homes that may not be covered by flood insurance. It may be quite difficult to obtain insurance if your property is located in an area that has more than the average risk of damage due to floods. Beachfront properties found in areas prone to storms and hurricanes may not always be covered. Thus, it is actually a misconception that everyone can get flood insurance.
How do you choose the proper policy?
The NFIP offers a range of policies for buildings and its contents against water damage. Prices for each are determined beforehand. The degree of risk that the property is exposed to is a factor that must be considered when choosing the right type of coverage. The risk level of the property is also a determining factor of the price of flood insurance.
When purchasing insurance against flood damage, it is important to note that flood policies are made effective 30 days after they have been purchased.
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