Flood insurance, while no one wants it, can save you a lot of grief if you live in a flood plain.
So how do you know if you need Flood Insurance?
Dave Ramsey’s article (https://www.daveramsey.com/blog/need-flood-insurance) offers a lot of great information regarding this topic, but I will sum it up here.
If you live in a high-risk flood area, just like home owners insurance, your lender will require you to obtain it before they will approve the loan. To find out if you are in a high risk area, you can check out https://msc.fema.gov/portal/search to see if your home or future home is in an at risk area.
Even if you are not in a high-risk flood area, that doesn’t mean it’s not possible for it to flood. You’ll want to see what level risk area you are in, and then decide if you would like to add flood insurance to your monthly bill. According to Dave Ramsey, those that live in a high-risk area usually come out on top (financially) since they must have flood insurance. If you do not have it and your home gets flooded, you will be out of pocket quite a bit from damages, even to the point of going upside down on your home.
It’s always something to consider when you’re purchasing a home. Will I need flood insurance if I’m in this area, or should I just go ahead and look elsewhere? Every situation is different, and it’s totally up to you to decide.
So let’s say you have found the home you love and now you need flood insurance. There are actually two types of flood insurance available: Federal and private.
National Flood Insurance Program (NFIP) is offered through FEMA and can cover you for the structure and personal property. The cost for this coverage depends on the risk area that you are in.
Private flood insurance is provided by an insurance agency, rather than the government. According to Dave Ramsey, private coverage has these pros:
- Higher coverage than what NFIP can provide
- Shorter wait time for pay outs
- Additional benefits such as short-term housing
- Backed by the state
- Real-Time Risk assessment
The cons are:
- Higher premiums
- Not backed by all banks
- May not be available in your area
Should you get both? If your home is worth more than $250,000, you will want to explore having both options.
If you have questions about flood insurance and would like to know more, ask me about some trusted insurance agents that can help provide you the information you need.
