Should You Get Flood Insurance? Here's What You Need to Know

Depending on where your home is located and what you hope to protect, a flood insurance policy can be a wise investment. But you'll want to purchase the policy long before an impending weather event.

As climate change brings about ever more severe weather events, including hurricanes of epic proportion that trigger torrential rainfalls and flash flooding, the question of whether to obtain flood insurance has never been more pressing.

As the Federal Emergency Management Agency (FEMA) website points out, floods can happen anywhere and even a mere inch of water can cause up to $25,000 in damage.

If you're unsure whether flood insurance makes sense for your living situation, here are some key questions and considerations to help sort out this important decision.

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How do you know whether you need flood insurance?

Your home's location should be a primary factor in determining whether flood insurance is a worthwhile investment.

"If you live in a coastal region or a flood-prone area, consider opting for flood insurance, a separate policy outside of any renters or homeowners' coverage." says Danielle Marchell, licensed insurance agent and spokeswoman for The Zebra.

In some cases, depending on who your mortgage lender happens to be and where your home is located, you may actually be required to have flood insurance. For instance, those who live in high-risk flood areas and have mortgages from federally regulated lenders such as the Federal Housing Administration (FHA) loan or the Veterans Administration will likely be required to purchase this type of insurance, says Pat Howard, property and casualty insurance expert for Policygenius. Those who are recipients of federal disaster assistance, such as FEMA grants, will also likely be required to purchase flood insurance.

"But even if you don't live in a flood zone or your lender doesn't require it, you should consider purchasing flood insurance, especially if you're in a moderate to low-risk flood area," explains Howard. "If you're unsure of your home's flood risk, you can check with FEMA's Flood Map Service Center to find out."

However, it's important to keep in mind that FEMA's flood maps can be outdated, meaning your home may have more or less flood risk than the agency's map indicates, adds Howard.

"If you live in a coastal community or low-lying area near a body of water, you should consider getting flood insurance regardless of what the FEMA maps say," says Howard.

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How much does flood insurance cost?

The monthly cost of flood insurance premiums may be another consideration for homeowners considering such a policy. The amount you will typically pay for a policy depends on a variety of factors including your home's flood risk designation, the year it was built, its elevation, and how it's constructed.

"If you live in a high-risk flood area, also known as a Special Flood Hazard Area, your rates will be higher than someone living in a low-risk area," says Howard.

In addition, if you live in an aging home, this too will drive up the price you pay.

"If your house is on the older side, it might be more challenging to protect against flooding, and could cost more to repair in the long-run compared to a newer home that's constructed with updated materials," says Marchell.

According to FEMA, the average cost of a National Flood Insurance Program (NFIP) policy is about $700 a year, says Howard. However, NFIP policy rates vary by state.

While a majority of consumers have flood insurance policies through NFIP, there's also an emerging market of private flood insurance. In some cases, private polices can be cheaper than what's offered by NFIP, says Howard.

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What's covered by flood insurance?

Depending on what you hope to protect, flood insurance may or may not make sense for your situation. Overall, flood policies are available to insure the dwelling itself, and also its contents.

NFIP offers two types of polices to address each of these areas—building coverage for your home and contents coverage for your personal belongings.

"Building coverage covers your home's foundation, including electrical and plumbing systems, while contents coverage covers your personal property, like furniture and electronics," explains Howard. "It's important to note that flood insurance typically doesn't cover finished basements."

In addition, if you need to relocate belongings as a result of a flood, your policy should cover the items for up to 45 days to protect against any damage, adds Marchell. There are, however, some significant exclusions in flood coverage.

"Policies will not cover damage to lawns, trees, and fences, or any money or deeds left behind," explains Marchell.

What's more, flood insurance coverage is limited to damage from weather-related floods and will not coverage damage from broken water pipes, dishwashers, washing machines, or a water main break.

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Climate change considerations

As already mentioned, climate change has intensified rainfall and flood conditions across the United States and the world, and this reality is increasingly worrying for Americans.

In fact, a study conducted by The Zebra in May 2020 revealed that three in four Americans worry they could face storm or disaster damage, with 65 percent of respondents attributing more severe storms to climate change. That worry is justified: Nearly one in four respondents (24 percent) said a severe storm or natural disaster had recently damaged their home, car, or personal belongings.

"Climate change is making hurricanes larger and more destructive, so if you live in an Atlantic or Gulf Coast state, it's a good idea to consider flood insurance regardless of your location in the state," explains Howard, of Policygenius.

Each of the contiguous states in this country have different outlooks for withstanding climate change, and as a recent Policygenius study points out, several of the states most vulnerable to climate disasters are actually the least prepared to withstand current and future risks. If you'd like to find out more about where your state stands on this front, check out the 2021 Policygenius Best & Worst States for Climate Change Index.

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Where to obtain flood insurance

Homeowners in every state have the option to purchase flood insurance through the National Flood Insurance Program managed by FEMA. These policies are usually sold by private insurance companies.

"A majority of flood insurance policyholders have an NFIP policy, and most communities participate in this program, so you will likely be able to obtain a NFIP policy," says Howard.

An increasing number of insurance companies are also writing their own policies, so you may want to shop around to compare your options and prices. Private flood insurance is fully underwritten and backed by private insurers and can generally be purchased as a standalone policy or an add-on to your homeowners insurance. Some insurers also offer excess flood insurance to supplement NFIP's coverage.

Perhaps even more important than where to obtain insurance is the question of when to obtain insurance.

"It's imperative to know that it's too late if you wait until the storm comes. Many insurance carriers enact binding restrictions as major weather approaches," explains Marchell. "Flood insurance and other disaster coverage usually won't take effect for 30 days, so knowing what your insurance covers well before a storm is key to ensuring you're protected."

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