Home Insurance Terminology Explained

What To Consider When Choosing Flood Insurance

If you own a home and have a mortgage funded by the government, you might be required to take out a flood insurance policy if you live in a high-risk flood neighborhood. Many homeowners resist taking flood insurance because of its high cost. 

However, this policy can give you immediate financial aid during a flood situation, so you won't have to exhaust your savings or take credit for rebuilding your home. Here are considerations you should make before taking a flood insurance policy.

What Floodplain Is Your Home Zoned For?

Homes are zoned for different floodplains. The floodplains rate an area as either high risk, low risk, moderate risk, or unknown risk. Therefore, if you are in a high-risk area, you will pay more for flood insurance than a person in a low-risk area. To ensure high quotes don't mislead you, it is crucial to determine the floodplain your home is zoned for.

What Does Flood Insurance Entail?

Flood insurance policies have two types of coverage: dwelling and contents. Dwelling coverage gives you financial protection against damage from flooding. It compensates you for damage to the structure of your home and any in-built appliances. This coverage comes with a cap of $250,000.

Content coverage is for your belongings. It covers things like furniture, clothing, and home décor. This is an optional coverage that comes with a cap of $100,000.

Private flood insurance companies also offer two types of coverage: primary and excess flood insurance. The primary flood insurance policy offers higher levels of coverage than the basic NFIP policy. However, excess flood insurance applies to homeowners who want additional protection beyond the fundamental NFIP limits.

Where Do You Buy Flood Insurance?

The federal government provides flood insurance. The National Flood Insurance Program (NFIP) is a government initiative, but it's also available through private insurance agents and insurers. Many homeowners opt for private flood insurance if the NFIP coverage is insufficient.

Generally, NFIP will cover the cost of restructuring your home. However, you only get actual cash value for your belongings. NFIP will value your possessions. There are also limits on coverage for furniture and belongings in your basement. Before taking flood insurance, consult an insurance agent to understand your options.

In Closing

If you live in a flood-prone area, make sure you shop for flood insurance. This will secure your house and assets from damage. Consult an insurance agent to understand the available policies around your neighborhood and the coverage that is best suited for you.