Flood Insurance Basics
Flood insurance is not like the other types of homeowner’s insurance policies out there in that many people do not need to purchase it. However, if you are one of the people who must or should purchase this type of coverage, it’s important that you learn its basics so that you can know what to expect.
What is Flood Insurance?
Flood insurance is a specific type of insurance coverage that financially protects policy holders against the loss of property from a flood. Not everyone is required to secure this type of insurance because not everyone lives in an area that’s susceptible to flooding. However, those who are recommended to purchase flood should strongly consider doing so.
What Determines the Need for Flood Insurance?
You are likely required to purchase flood insurance if your structure is located within a high flood-risk area, which means that there is at least a1% chance, and it has a mortgage or loan on it from a federally-regulated institution. However, if you just own unimproved land in the high risk area, your insurance won’t be mandatory, but your lender may have a clause to require it.
Where Can Flood Insurance be Purchased?
If you live in an area that is at risk for flooding then you can easily purchase the flood coverage with your local insurance company.
So just how much insurance should you buy? If you’re purchasing federally-secured insurancein the FEMA-mapped high-risk area then you will likely be required to purchase an amount equal to the outstanding principal of your mortgage loan, the value of your building, or the maximum coverage available – whichever is less. In this circumstance, your insurance must be maintained for the life of your loan.
Now that you’ve learned some of the basics of flood insurance, it is up to you to determine whether you need it for your home. If you do, you next step is to shop around for home insurance rates and the best policy for you.