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Do You Really Need Flood Insurance?

By Compuquotes Team on March 27th, 2008

Homeowners Insurance

Every year an average of $2.4 billion is paid out against flood insurance. Many people with homeowners' insurance don't realize that flood insurance is not covered in their homeowners' policy. And of course, many of us who don't live on or near the coast or water don't feel we need it. But how do you really determine whether you need flood insurance or not?

Flood insurance is mandatory for those people living in areas that are situated in so-called high risk flood areas. High risk areas would be such places as those along the coast, or next to a river or lake as well as very low lying ground - at or below sea level. Surprisingly, around 25% of all flood claims are for policies for homes situated in low to moderate risk areas.

Even if you don't obviously live in an area prone to hurricanes or high tides, keep in mind that floods can be caused by other things. Winter storms, melting snow, mudflows or erosion and subsidence can all cause flooding. And a flash flood can occur when there is an excess of rainfall in a short time.

Consider flood insurance if you live in a growing area - often, excessive new land development can create the potential for flooding. Much new construction occurs on natural runoff paths - if these are built upon, the nearby land can be more prone to flooding.

You are actually more likely to suffer flood damage than fire damage - during the course of a typical 30 year mortgage, your home has a 25% chance of flood damage, as opposed to a 9% chance of fire damage. It's estimated that just an inch of water is enough to cause extensive property damage and most cars can be easily swept away in two feet of water.

A good source of information is the National Flood Insurance Program (NFIP) a program established by Congress in 1968. The NFIP can help determine whether you really need flood insurance - and how to obtain it. In 2005 alone, the NFIP paid out a staggering $16 billion in flood claim payments and has paid $30 billion out to homeowners since 1978.

The NFIP can provide a list of reputable insurance companies that provide flood insurance. As always, shop around when comparing policies - the average monthly premium for flood insurance is around $30. If you are considering taking out flood insurance, don't leave it until the last minute - there is a 30 day waiting period for the coverage to take effect.

When shopping for flood insurance, consider the amount of the monthly premiums as well as the amount of coverage you will receive in the event of a flood. A typical flood insurance policy will cover the costs of replacing or repairing property as well as goods damaged by a flood. In this case, contents include everything from furniture and carpets to food in your freezer.

Flood insurance - although often considered unnecessary - is well worth the cost for the peace of mind it provides. It's something every homeowner should consider.

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