Friday, May 2, 2014

Earthquake & Flood Insurance are not included in Your Homeowners Insurance – Part 2

In our last blog we discussed earthquake insurance and noted that it is not part of your homeowner’s insurance policy. Earthquake insurance is readily available in the marketplace and there are many insurance carriers that provide the coverage. Today we are going to discuss flood insurance which is also not included in your homeowner’s insurance policy. In the United States flood insurance is a separate policy from the homeowners policy either purchased directly through the National Flood Insurance Program (NFIP) or through a write your own program whereby you purchase flood insurance through an agent who works with an insurance company that receives backing from the NFIP. Either way, all flood insurance in these two options is backed by the United States Government. Just recently, private flood insurance has become available in the South Eastern United States. This private insurance is not backed by the United States but is financially strong and has competitive rates. We should see more private flood insurance become available over the next few years as competition for flood insurance becomes more viable.

Every year, the news shows a tragedy from flooding. News crews descend into a community that has experienced flooding and the topic ends up with a homeowner who has just been informed by his insurance company that his homeowners insurance will not cover the flood. This is just terrible not only because of the extreme suffering of this family and others just like them but because we can’t seem to get the word out to everyone that flooding is not covered by homeowners insurance. There are so many myths and distortions that it is important that we get the truth out to the consumer:

1.      Flood is never covered by a homeowners policy.

2.      You must buy flood insurance to be covered for flooding.

3.      “I don’t need flood insurance because the government will buy me out or help me to rebuild.” NOT TRUE! The government may help you with temporary housing, food, clothing and medical assistance and they may assist you with a low interest loan so you can rebuild but they are not going to rebuild for you.

4.      “If my home is damaged or destroyed my mortgage will be forgiven by the lender.” NOT TRUE!

5.      “I don’t need flood insurance because I am not in a flood zone.” NOT TRUE! Everyone everywhere is in a flood zone. The difference among flood zones is the amount of risk for flooding.

6.      “Flood Insurance is too expensive” MAYBE – MAYBE NOT! If your home was built according to standards for flooding within its flood zone the cost can be very reasonable. If your home is located in a “preferred risk flood zone” the government will subsidize your insurance rates. However, if your home was built before flood standards or built without regard to flood rules the cost can be very expensive.

7.      “I’m going to shop around for the best rate” All federally backed flood insurance is the same premium whether you buy direct or through an agent. The NFIP sets the annual premium.

The decision to buy flood insurance should be up to you to decide unless you have a mortgage and your lender requires you to have flood insurance. If you don’t buy flood insurance and your home is destroyed by a flood that was a calculated risk that you took. What is important is that you know that flood insurance is not included in your homeowners insurance. Flood insurance is readily available for purchase. If you have questions about flood insurance you can go directly to the NFIP website at www.floodsmart.govthis is a terrific site with loads of information about flooding. However, if you want real information specific to your home talk to your insurance agent. Your agent can get your exact flood zone and determine the amount of insurance needed and the cost. If you would like more information you can contact me at (805)238-1818.


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