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Flood Insurance Basics

Flood Insurance Basics

You’ve probably heard this horror story before — someone loses a home due to a flood and learns after the fact that standard homeowners insurance doesn’t cover flood damage. We want you to be educated about all of the risks you may face – before a loss occurs – so you can decide on appropriate insurance coverage before the damage is done. Spring is a prime season for flooding, so now is a good time to review your options.

Because very few companies offer flood insurance, the U.S. government created the National Flood Insurance Program (NFIP) in 1968, which is available to homeowners, renters and business owners. Flood insurance is typically required when trying to obtain a mortgage on a home in a higher risk area for flooding.

But, even if you aren’t required to have flood insurance, you might want to look into a policy just for peace of mind. According to the NFIP, nearly 25% of the program’s claims occur in moderate to low-risk areas. Check out the questions and answers below to help determine if flood insurance is right for you.

Is flood insurance available in my area?

To participate in the NFIP, a community must adopt and enforce a floodplain management ordinance with rules regarding construction in certain flood-prone areas. In exchange, the government makes flood insurance available within that community. We’re happy to help you find out if you’re eligible for flood insurance. Just give us a call at 507-252-8720 or visit https://msc.fema.gov/portal.

What does it cover?

The NFIP provides coverage for both the structure and contents, though coverage for contents is optional in some cases.

Keep in mind that you typically can’t purchase flood insurance and have it take effect the next day. There is usually a 30-day waiting period. (Exceptions to this rule apply, however, particularly when the insurance is required by a lender and is purchased during the process of securing a mortgage.) If you think you need flood insurance, don’t wait to buy a policy!

What doesn’t it cover?

Generally, government-issued flood insurance will not cover the following: Buildings entirely over water or principally below ground, gas and liquid storage tanks, animals, aircraft, wharves, piers, bulkheads, growing crops, shrubbery, land, roads, machinery or equipment in the open and most motor vehicles.

How much does it cost?

As with all insurance policies, the cost of flood insurance varies depending on your situation. If your home or business is in a high-risk area, such as a “special flood hazard area,” your premium naturally will be higher than those in low or moderate-risk zones. Premiums are based on how old the building is, how many floors it has, the location of its contents, your deductible and more. Renters insurance is typically less expensive, as renters generally insure their belongings and not the building.

 

Disclaimer: The above are merely suggestions and tips, and are not meant to guarantee individual results. Any changes to insurance should be discussed with a licensed professional.