Now that you have bought a home, you want to make sure it is properly insured. While most homeowners insurance policies cover damage caused by water spewing from a burst pipe or storm damage, most standard policies don't cover flood damage. Flood insurance through the National Flood Insurance Program is limited to $250,000 for your building and $100,000 for personal belongings. If you need additional coverage you will need to buy excess flood protection insurance.
Find an insurance agent that handles excess flood protection insurance. The Federal Emergency Management Agency maintains list of qualified agents by ZIP code. You can access this list at the FloodSmart.gov website. Your homeowners insurance agent may also be able to refer you to a qualified excess flood insurance agent. You may also be limited by the availability of companies in your area that offer excess flood insurance. Insurance carriers offer excess flood protection insurance on a voluntary basis, and may not offer policies in high risk areas, such as those in hurricane zones.
Determine your needs and consider your budgetary limitations. You typically have the option of purchasing building coverage, which covers the physical structure, plumbing, electrical system and major appliances, and contents coverage, which covers your possessions. While residential policies offered by the National Flood Insurance Program are limited to $250,000 for your structure, some insurance carriers offer coverage of up to $15 million, according to a 2006 article by Britton Wells in the "Insurance Journal." Consider whether you prefer replacement cost or actual cash value. A replacement cost policy will typically be more expensive, but will cover the actual cost to rebuild. Actual cash value is usually cheaper to buy, but you will only receive the actual value of your property, which may not be sufficient to rebuild.
Purchase your policy. Your premiums are determined by a number of factors, including the age of your home, the area and flood zone designation where your home is located, the amount and type of coverage you desire and the elevation of your home compared to the base flood elevation. The "Insurance Journal" estimates the average annual premium for a $1 million replacement cost policy at approximately $1,000 as of 2006. You may pay your insurance premium directly, or your mortgage company may include the premium with your monthly mortgage payment.
- FloodSmart: Residential Coverage
- FloodSmart: Doesn't My Homeowners Insurance Policy Cover Flooding?
- FloodSmart: Am I Eligible For Flood Insurance?
- FloodSmart: Who Do I Contact if I Want to Purchase a Flood Insurance Policy?
- FloodSmart: What if I Want to Purchase More Insurance Than the NFIP Offers?
- Insurance Journal: Excess Flood Market Steps Up When National Flood Program Falls Short
- SWBC: Properties in NFIP Participating Communities
- FloodSmart: Summary of Coverage
- Flood insurance policies offered by the National Flood Insurance Program usually do not go into effect until 30 days after you purchase your policy. If you live in an at-risk community, you should not wait until an event is on the horizon to buy flood insurance. Check with your agent to determine when your excess flood protection policy goes into effect.
Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.