Many homeowners are unaware that their property or household insurance policy does not cover them for damages in the event of acts of God or Mother Nature, including floods. This means that additional flood insurance is often necessary to provide cover in this eventuality.
Whether you need flood insurance from a Miami insurance agency and the amount of cover you should have is largely dependent on the risk of a flood occurring in your specific location. The higher the risk, the more likely it is that you will require flood insurance. Areas have been mapped or classified into different zones to help establish the risk. The zones and associated risks are as follows:
- Zone D
Zone D includes areas that have yet to be mapped and therefore the risk of floods occurring has not been established. It is recommended to purchase flood insurance if you are located in a Zone D area, especially if flooding has occurred in the past.
- Zone A And Z
These are extremely high-risk zones and it is absolutely essential to have flood insurance as it is more than likely that a flood will occur at some point. However, you will probably end up paying much more for a flood insurance policy in zone A or Z than any of the other zones because of the increased risk.
- Zones B, C and X
These 3 zones are considered to carry a low to moderate risk of floods occurring. It is recommended to have flood insurance for these areas. Keep in mind that low risk does not mean no risk when considering purchasing flood insurance. There is no classification for a no flood zone and every location may be prone to flooding at some point or another.
If you are unsure of the zone classification for your location, contact the NFIP (National Flood Insurance Program) who will provide you with exact information on the risk associated with your specific location.
As briefly mentioned above, these zone classifications are also used to determine the cost of your insurance. Low risk zones have the lowest rates whereas high risk zones have the highest rates. Zone D areas also carry higher premiums than low or moderate risk zones as the risk has not been established. In other words, flood insurance providers determine their premiums according to the risk that a flood will occur.
It is important for homeowners to take into consideration the different ways in which floods can occur. Floods do not occur from rainwater alone but can also be a result of tidal waves, hurricanes, rising ground water or other natural events. The zone classifications consider all the different ways in which a flood can occur.
Other Reasons That You Should Have Flood Insurance Include:
- Claim Statistics
Statistical data shows that most insurance claims for flooding come from low to moderate flood zones. This is largely because the zones form the greater part of the landscape and therefore it is more than likely that a flood will occur in even the lowest risk zones. Even in the desert, flash floods can occur and be very destructive.
- Government Aid
There are two important factors to consider when depending on government aid for assistance. Firstly, the area needs to be declared a Federal Disaster zone before anyone can apply for government aid. Secondly, the government doesn’t hand out funds for repairs or rebuilding but rather provides loans that need to be repaid. These loans may not be sufficient to cover your losses whereas flood insurance will provide cover relevant to the amount of insurance that you have taken out.
- NFIP And Federal Flood Insurance
Federal Flood Insurance policies provide a maximum amount of $250,000 to rebuild a home that has been lost or deemed unlivable due to a flood. The NFIP offers insurance of up to $100,000 for the replacement of possessions. Any amount over and above these amounts will need to be paid from your own pocket or you can opt for a private flood insurance policy to cover the difference.
It is recommended to draw up a list of all your possessions and attribute a monetary replacement value for each. Remember to keep the replacement value in mind and not the amount that you actually paid for the items as this value is always likely to be higher. Now add the amounts together and you will arrive at an estimate of what it will cost to replace all your belongings of they are lost in a flood.
Ask your real estate broker or a qualified building contractor of an estimated cost for rebuilding your home. If either of these amounts exceed the limits for your Federal or NFIP cover, you will need additional flood insurance.
- Homeowners Insurance
It is important to stress once again that homeowner’s insurance does NOT cover loss or damages due to flood. Even if there is a provision for floods in the policy, these are ONLY for floods that occur from burst pipes, blocked drains or faulty water heaters. These types of floods are however not covered by a flood insurance policy, the NFIP or Federal Flood insurance.
To qualify for NFIP insurance, your community must meet the criteria for and participate in the National Flood Insurance Program. For Federal Flood Insurance, your home must be financed or refinanced through a federally regulated financial institution.
So Do You Require Flood Insurance If You Do Not Live In a High Risk Flood Zone?
It is generally only considered to be necessary to buy flood insurance if you reside in a high-risk zone where the chances of flooding are greater than 1% a year. However, due to the unpredictable nature of these natural disasters, it is considered prudent to have flood insurance if you can afford it.
Most people should be able to afford some form of flood insurance even if they live in a high-risk zone by choosing a policy that suits their budget. For example, insuring rebuilding for $20,000 and belongings for $8,000 can cost less than $150 a year. Don’t be caught off guard!