How to not drown in rising flood insurance premiums

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How to not drown in rising flood insurance premiums
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Homeowners with flood insurance got an unwelcome surprise on April 1 in the form of a 6% premium hike on average for policies underwritten through the National Flood Insurance Program.

No, it wasn’t an April Fool’s Day joke! It was the latest in a series of premium rises that is surely a sign of what’s to come in the flood insurance market.

Read more: 9 accidents homeowners insurance may not cover

Here’s why you need flood insurance

The average premium on a government-underwritten policy is right around $878 annually, according to FEMA, the NFIP’s administrator.

However, if you’re like most homeowners, you probably wonder if you really need flood insurance.

Only 14% of homeowners across the country say they have a flood insurance policy, according to a recent survey from the Insurance Information Institute.

That’s not good when you consider floods are the number one natural disaster in the United States, according to FloodSmart.gov.

Unfortunately, flood insurance is one of those things that people tend not to think about until they need the policy.

There’s the assumption that floods are covered under regular home insurance policies. But typically they’re not. And if you’re finding that out after a flood, by then it’s too late because the damage is already done and you’re left without recourse.

6 lames excuses why people don’t have flood insurance

Here’s a list of the most common excuses for not having flood insurance and some info intended to get you moving if you don’t already have a policy in place…

“I don’t know how to get coverage”

You get flood coverage through the National Flood Insurance Program (NFIP) and also a few private insurers.

“I can’t afford it”

Premiums will be higher if you live in a coastal community — no doubt about it. Yet the average federal flood insurance premium is somewhere around $878 annually, says the NFIP. That’s for a policy covering damage up to $250,000.

Shopping around is key to getting a good flood insurance quote. You want to check with both the NFIP and private insurers.

NFSEdge is one private insurer recently mentioned by The New York Times in its write-up about flood insurance. Do an online search for “flood insurance quote” to find other providers in your area.

“I’m already covered through my other insurance”

The reality is that damage from flooding is not covered under standard homeowners, renters or business insurance policies.

Now, what will protect you in the event of flooding is an auto insurance policy with comprehensive coverage, according to the Insurance Information Institute. But because comprehensive coverage is not mandatory, not everyone has it.

So here’s a word to the wise: If you do have a comp policy, double-check with your auto insurer to make sure damage from flooding is covered.

“I don’t live in a flood plain”

Don’t fall into the trap of using this as a justification to not have flood insurance! The NFIP reports that some 20% of total flood claims paid are from properties outside traditional high-risk areas.

“Insurance is optional for me because I own my home outright”

Many people who own homes do so mortgage-debt free. So insurance is optional for them. Yet even if you live in a low-lying area that historically hasn’t flooded, it’s still a good idea to buy a flood policy.

“I’ll just wait until a big storm looms to get the coverage”

This is one case where if you snooze, you lose.

Coverage typically doesn’t become effective until 30 days after the date you purchase the policy. If you wait for a Superstorm Sandy or a Hurricane Katrina to be on your doorstep, it’s already too late.

So get online and get a flood insurance quote today!

Top 10 most significant flood events by National Flood Insurance Program payouts

Rank Date Event Location Number
of paid
losses
Amount
paid
($ millions)
Average
paid loss
1 Aug. 2005 Hurricane Katrina AL, FL, GA, LA, MS, TN 167,984 $16,318 $97,142
2 Oct. 2012 Superstorm Sandy CT, DC, DE, MA, MD, ME, NC, NH,
NJ, NY, OH, PA, RI, VA, VT, WV
130,214 8,249 63,352
3 Sep. 2008 Hurricane Ike AR, IL, IN, KY, LA, MO, OH, PA, TX 46,660 2,697 57,798
4 Sep. 2004 Hurricane Ivan AL, DE, FL, GA, LA, MD, MS, NJ, NY,
NC, OH, PA, TN, VA, WV
28,297 1,612 56,974
5 Aug. 2011 Hurricane Irene CT, DC, DE, MA, MD, ME, NC, NH,
NJ, NY, PA, RI, VA, VT
44,266 1,340 30,270
6 Jun. 2001 Tropical Storm Allison FL, LA, MS, NJ, PA, TX 30,671 1,105 36,028
7 May 1995 Louisiana Flood LA 31,343 585 18,667
8 Aug. 2012 Tropical Storm Isaac AL, FL, LA, MS 12,039 554 46,026
9 Sep. 2003 Hurricane Isabel DE, MD, NJ, NY, NC, PA, VA, WV 19,938 500 25,091
10 Sep. 2005 Hurricane Rita AL, AR, FL, LA, MS, TN, TX 9,529 475 49,821

Includes events from 1978 to April 30, 2016, as of June 14, 2016. Defined by the National Flood Insurance Program as an event that produces at least 1,500 paid losses. Stated in dollars when occurred.

Source: U.S. Department of Homeland Security, Federal Emergency Management Agency; U.S. Department of Commerce, National Oceanic and Atmospheric Administration, National Hurricane Center.

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Theo Thimou About the author:
Theo is director of content for clark.com. He has co-written 2 books with Clark Howard, including the #1 New York Times bestseller Clark Howard's Living Large in Lean Times.
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