Flood insurance represents a valuable investment for many homeowners across the country, and for good reason. This type of insurance guarantees that your residence and personal belongings are protected against flooding due to a severe rain storm or other inclement weather. Therefore, purchasing flood insurance may enable you to avoid substantial losses due to flood damage associated with a natural disaster.
So how does flood insurance work exactly? Here are three things that every homeowner needs to know about flood insurance.
1. Flood insurance and homeowners insurance are very different.
Flood insurance serves as a supplemental insurance that can be purchased in addition to your homeowners coverage. However, flood insurance does not substitute for home insurance, and vice-versa.
Typically, a homeowners policy does not offer flood coverage. This means if your house is filled with water due to a natural disaster, your homeowners coverage will not protect you against property damage or losses.
In many cases, a bank or credit may require a homeowner to purchase flood insurance if he or she owns a house that is located in a floodplain. Conversely, you may want to consider purchasing flood insurance even if live outside a floodplain.
Remember, even 1 inch of water after a flood can cause major damage in your home. But if you have flood insurance in place, your home and belongings will be protected against flooding at all times.
2. Flood insurance is provided via the National Flood Insurance Program (NFIP).
The NFIP offers flood insurance policies for your home and possessions. A flood insurance policy for your home guarantees that you're protected against any flood damage to your residence. Meanwhile, contents coverage insures you against loss of possessions due to flooding.
Also, it is important to note that flood insurance policies usually require at least 30 days before they go into effect. This means that you likely won't be able to purchase flood insurance only days before a major hurricane is expected to arrive in your city or town.
3. Flood insurance won't necessarily cover your entire home.
Federal flood insurance commonly offers coverage worth up to $250,000 for your home and $100,000 for your belongings. Therefore, if you own a home that is worth $300,000 and it is destroyed in a flood, your flood insurance policy will not cover the entire cost to replace your residence.
Comparatively, you can purchase "excess flood insurance" through a private insurance company to supplement a federal flood insurance policy. Excess flood insurance offers a great option if you want to insure your home and possessions against floods and guarantee that any policy claims are covered beyond national limits.
4. Floodplains may change over time.
Floodplain maps frequently change and evolve over time. Thus, a residence that was not in a floodplain several years ago may now be located in a floodplain.
If you plan to sell your residence, your real estate agent can help you find out if it is located in a floodplain. Or, if you intend to buy a new home, your real estate agent can tell you whether a residence is located in a floodplain as well.
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