How to Purchase Flood Insurance

Did you know that your homeowners insurance policy probably does not cover flood damage? Too many homeowners find this out the wrong way, by shelling out thousands of dollars to repair damage from a flood. The average home incurs $30,000 of damage following a flood, and you don't even need to live near a body of water to suffer flood damage. During the life of a typical 30 year mortgage, your home has a 26 percent chance of flood damage, as opposed to a 9 percent chance of fire. If you live in an area where your house is at risk of flooding, protect both your home and your wallet by considering flood insurance.

Do you need flood insurance?

Most people don't realize it, but no matter where on the planet you are located, there is always some risk of flooding. This risk varies from very high to very low. Most homes fall into the moderate risk category. To determine your risk, look at the FEMA flood insurance rate map (also known as a FIRM) for your region. Floodplains are expected to flood periodically, and are described by the expected frequency, such as an annual floodplain or a 100-year floodplain.  If you're in a flood plain, you should consider purchasing flood insurance, since it is a reasonable assumption that a flood is likely during your lifetime.

How much is it, and where can you get it?

The National Flood Insurance Program sets flood insurance rates in the United States. Coverage may be as low as $100 per year. Shopping around for flood insurance isn't necessary, since the NFIP sets the rates. Flood insurance rates depend on your home's size and building type, as well as your location. The flood zone in which you're located will have a drastic affect on your flood insurance rates. You'll also need to consider the potential amount of damage to determine how much coverage you need.  There is a 30 day waiting period before it takes effect, so don't wait until a flood is predicted to investigate your insurance options.

What if you don't want flood insurance?

Federal law requires flood insurance in high risk areas; your mortgage company may also require you to secure flood insurance before your financing can go through, since the area has a substantial risk of flooding during the lifetime of the loan. Check the FEMA flood maps to determine whether flood insurance will be required.

In some cases, specific areas have been built up so that their elevation or the elevation of the building itself no longer places the area in the flood plain, even though surrounding areas are at a lower elevation and are therefore susceptible to flooding. If this is the case, and you want to opt out of flood insurance, you'll need a special type of land survey known as flood certification. This survey allows you to apply for a Letter of Map Amendment (LOMA) or Letter of Map Revision (LOMR), the only way to get out of buying required flood insurance. Depending on the structure, an Elevation Certificate from a licensed land surveyor may also be required to show that the building itself is constructed to be higher than the flood level. These certificates can reduce the amount of flood insurance you must purchase or even remove the requirement entirely.

Charles Lee Iner, RLS
January, 2010