Top 5 Misconceptions About Flood Insurance
Updated: Jun 21
Flooding is the most common natural disaster in the United States, but floods, and more specifically flood insurance is often misunderstood.
According to FEMA, the average annual cost of flood damage in the United States is more than 2 billion dollars per year. Even more concerning, flood damage in the US is on the rise and predicted to increase by more than 60% over the next 30 years. Yet, there are still many misconceptions about how to protect your home with flood insurance.
With progressing climate change and continued development in flood-prone areas, now is the time for property owners to learn more about their flood risk, and to inquire about flood insurance. Securing flood insurance should be a key consideration for businesses and homeowners across the country, regardless of their property’s proximity to water. Flooding is a year-round risk that can happen anywhere and can lead to costly damages for property owners who choose to ignore the threat.
Here are five important details about flood insurance that often cause confusion for businesses and homeowners:
The NFIP program administered by FEMA is the only provider of flood insurance: Many believe that their only option for flood insurance is the National Flood Insurance Program (NFIP), but the private flood insurance market is often a better fit for property owners. Backed by the federal government, the NFIP only provides homeowners up to $250,000 in coverage and businesses up to $500,000. This can leave your property underinsured. There are also many gaps in Coverage with the NFIP, such as a lack of coverage for additional living expenses, and no coverage for basement contents. Even with the NFIP’s new Risk Rating 2.0 flood risk assessment program, private flood insurance, backed by major carriers with strong financial ratings, can typically offer more comprehensive coverage, more competitive rates, and superior customer service for policyholders. While many Realtors, lenders, agents and brokers may point property owners to the NFIP out of habit, savvy consumers should know to request a quote from the private flood insurance market as well.
Flooding is covered under a homeowners policy: While a standard homeowners policy does provide coverage for many types of perils, including fire and lightning, flooding is specifically excluded in most policies. Property owners who are depending on their homeowners policies to protect them against flood damage are often left paying out of pocket for any destruction the flood waters may have left in their wake.
You don’t need flood insurance if you aren’t on the coast: It may be tempting to believe that you only need a flood policy if you live on the coast or in flood zones that require it, but that is not the case. In fact, according to the Insurance Information Institute (III), 20 percent of flood claims occur in low-to-moderate flood risk areas, making coverage a smart move for those living outside the high-risk zones.
All flood coverage comes with a 30-day waiting period: Flood policies usually come with mandatory waiting periods to prevent those who might wait until a flood is forecasted to buy a policy. For example, the NFIP typically requires a 30-day waiting period before a policy becomes effective, but many private flood insurers can put a flood policy in force in less than half the time., It is important to note that no waiting period is applied to those who are purchasing or refinancing their home and are required by their lenders to purchase flood insurance.
It won’t happen to me! Many property owners think that because their home is not located in a flood zone they are not at risk. They often assume that a lack of flooding in the past means they won’t sustain damage now. Unfortunately, this is not always the case. A report from the Association of State Floodplain Managers shows that FEMA’s flood maps consider only one-third of the 3.5 million miles of streams and only 46 percent of shorelines in the US. Further, most of these maps are not updated regularly and often fail to consider rapid rain accumulation, climate change and population expansions, according to Bloomberg.
Flooding is a constant threat across the country. Property owners should be able to separate the misconceptions from reality when it comes to flood insurance. Reach out to FloodPrice.com to learn more about your flood risk and to get a quote in minutes.