The Importance of Buying Flood Insurance

A couple of recent articles (one at The Simple Dollar and another at Money Smart Life) got me to thinking about living in a flood zone and how important it can be to have flood insurance. Can you imagine what it would cost to recover from a flood? And are you prepared to foot that bill if it ends up happening? In most cases, the answers to these questions are no and no.

Before we go any further, let’s talk a bit about what exactly flood insurance is (and isn’t). Unlike a standard homeowner’s insurance policy, flood insurance covers losses due to flooding. A standard flood policy covers things such as structural damage, damage to your furnace, water heater, and/or air conditioner, debris cleanup, and damage to floor surfaces such as carpeting and tile. You can also buy a policy to cover your belongings.

If you live in a high risk area, chances are your mortgage lender requires you to carry flood insurance. But how exactly is flood risk determined? In general terms, FEMA has identified land areas (referred to Special Flood Hazard Areas) that run a 1% or greater risk of flooding in any given year. These are referred to as 100 year flood zones, and being located in one typically means that you have (and should probably want) to be carrying flood insurance.

While 1% per year doesn’t seem like a lot, consider the odds over time… Indeed, the chances of having at least one flood in a 100 year flood zone during a 30 year span (the life of a typical mortgage) is just a shade under 26%. That’s right, if you live in a 100 year flood zone, the odds are a little better than one in four that you’ll experience a flood during the life of a standard 30 year mortgage. Even over 10 or 20 years the chances of a flood are still pretty substantial, at 9.6% and 18.1%, respectively.

So how do you know if you need flood insurance? In many cases, your mortgage lender will tell you. But if you’re interested in checking things out yourself, you can take a gander at the flood maps — these are sometimes available at your local library, your county planning commission, etc. You can also check them out online at the FEMA Map Service Center. Alternatively, you can search for your address over at

Finally, how do you get flood insurance? If your community participates in the National Flood Insurance Program (NFIP) you should be able to purchase flood insurance from a local insurance agency. You can search for agents in your area by going here. Just keep in mind that there’s typically a 30 day waiting period before flood insurance takes effect, so you can’t simply wait for it to start raining before you call.

When considering your options, please keep in mind the importance of insuring against events that you cannot afford to deal with.

21 Responses to “The Importance of Buying Flood Insurance”

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  4. Anonymous

    Please Google Flood Painesville Ohio July 2006.

    This was and still is a nightmare. I lived in a 38 Condomimium complex. The complex flooded up to the second floors and we had to be rescued by boat from the bedroom windows. The complex was condemned and will be torn down. Mortgages still are owed and no insurance and no equity.
    1) If your Condo master insurance plan ( flood insurance) does not cover your buildings for 80% of the value, than your individual policies are worthless.
    2) Even though banks are required by law to “force place” flood insurance, if you are in a flood plan and do not have a polcy, there are no penalities ($25.00) for the banks for not insuring the mortgage against flood.
    3) Federal gov’t estimated $40,000.00 in personal property loss. That’s for a kitchen, bath, living room, garage, crawl space and utility room. Sounds like a lot, but starting adding up just your music collection, 40 years of records, tapes and CD’s.Everthing was totally submerged for 3 days- nothing survived except what was in the upstair bedrooms. Even all the cars whether in the garages or parked outside were completely under water and totalled.
    4) Had to buy a new car( auto insurance did pay but not for contents) which came with a tape and CD player – did not have one piece of music to play in the car. Lived with relatives, motels and shelter until settled. Thank God, I had savings and vacation time and was able to find an apartment. Also had wonderful son, daughter-in-law and grandchildren who took over and moved my stuffs to storage through all the muck. Had to move ASAP before mildew ruined the rest of property. Prior to condos being condemned by the city, had to tear out lower level dry wall and throw out all contents onto lawn for bulldozers to take to the dump. My son took 2 weeks off of work to help me every day while I had to go to meetings with the city and disaster relief agencies.

    Two years later, mortgage still due, no insurance, lost equity in condo ($60,000.00) and everything is in court.

    Please get flood insurance to pay for living expenses, movers, storage, tear out, personal property etc. and lost wages if possible.

  5. Anonymous

    We are currently in the process of refinancing our home to get away from our mtg company that requires us to have way too much flood insurance with a ridiculously small deductible. We currently pay $2,600 a year. With the new mortgage company, we will only pay $900/yr. I have lived in this neighborhood all my life and our house is built up higher than surrounding houses. We have had 2 horrible floods and all our house got was water in the basement (which, by the way flood insurance will only cover some basement appliances but no other damages after the deductible). We are basically paying for the lender losing their butts in Katrina.

  6. Anonymous

    I actually work as Customer Service for flood insurance. A few things I’d like to add: flooding caused by ‘rising water’ or ‘wave action’ is covered, otherwise your homeowners may cover it; if a mortgage company requires it make sure you buy your own policy, not the one the mortgage forces on you, theirs may cost 3-4X more annually, plus your coverage should begin as soon as the premium is received; no payment plans are allowed, premium must be paid in full up front; and regardless of which agency you go through the rate will be the same because all flood insurance is regulated by the government, so you can only have one policy in effect at any time.

  7. Anonymous

    Thanks, Nick.

    I don’t think I have any outside electrical equipment except one outlet that is just below the eaves, plenty high!

    Yep, rebuilding a similar house (to code) would be the idea. But I don’t know how building costs compare to buying costs.

  8. Anonymous

    Debbie- in addition to moving electrical boxes, you may want to look into having any outside electrical equipment (HVAC, pool pumps, etc) elevated off the ground. I live in the Gulf Coast of FL and its relatively common to see such things 4 or more feet above the ground level of newer homes here for added safety. Its probably not reasonable to attempt to rebuild your exact same house, but you could compare what a builder might charge you to build something similar (footage, # of bed rooms)if you didn’t need to buy a house estimation purposes and then add a cushion for inflation. You’d also want to think about where you’d live during the time to rebuild.

  9. Anonymous

    I don’t live in a flood zone, but I found on a map that the boundary of the 100-year floodplain is at my back fence. On the other side of that fence is an apartment complex with virtually no drainage as it’s all buildings and parking lot. So if they flood, I’m pretty sure I’m going to be flooding, too!

    So I have flood insurance and the rate is comparable to Sarah’s above (though my house is cheaper).

    I’ve heard that if the lines get redrawn and my house gets included, that since I have had flood insurance all along, my rates will be grandfathered–I will continue to pay these low rates. I think I read this in FEMA documents, but I can’t remember.

    What I wish I knew is how to estimate the rebuilding cost of my house if it were flooded so I would know the right amount of insurance to get.

    And I also wish I knew if there were inexpensive ways to protect a house from flooding. (Perhaps not a moat.) I’ve heard that moving all your electrical boxes higher on the walls, for example, is a good idea. And since my house is over 50 years old, a little re-wiring might be wise anyway, so if I re-wire, I should do it that way somehow. Maybe put chair rails everywhere and put the outlets in those so they won’t be unsightly. The fuse box is already at shoulder level.

    I’m pretty sure that sticking the whole house on stilts would not be cheap at all!

  10. Anonymous

    I live along the Gulf Coast, and am not required to have flood insurance by my mortgage lender, because according to the FEMA maps our house is in Zone X (no expected risk, as opposed to A or V zones). Just barely – there’s A zones across the street. After the local paper ran a graphic showing how our town would have flooded if a Katrina-type storm had landed here, I got flood insurance. The max I could get cost ~$300/yearly. It covers $250K in structure, and adds $100K for contents. Knowing these numbers has been a great ease to my mind in future planning – we will actually be better off financially if we flooded out!

    Keep in mind – “flood” is rising water – the natural conduits being full. The hurricane policies generally only cover wind-driven rain or wind damage. Burst-pipe damage is a separate item in my general homeowner’s policy.

  11. Anonymous

    We live in a 100-year flood plain and were forced to purchase flood insurance by our mortgage lender. We were naive first time home-buyers, and when asked, our realtor told us it “couldn’t possibly cost more than a few hundred a year.” Wrong. Try $2000. We were told after purchasing the home by the city planner that only the front corner of the front yard is in the flood plain – the house isn’t – but our lender still made us get coverage up to the entire value of the mortgage.

    The NFIP classifies different types of flood plains and charges different rates accordingly. We live in a 100-year standing-water flood zone (there is a drainage creek behind the houses across the street). At worst, our crawlspace would flood and maybe some floors might get damaged. I was surprised to find that our premiums would be $2000 a year, but that if we lived on a river bank or the ocean, they would have been significantly less – almost 50%. I’m still trying to figure that one out.

  12. Anonymous

    One other thing I forgot to mention in my post, items stored in any part of your house that is completely underground, such as your basement, are often not covered by flood insurance.

  13. Anonymous

    I guess a lot of it comes down to where you live, and what are the chances of you experiencing a major flood from natural causes of a pipe exploding..

    Personally i opt to not have it.. have enough insurance on other things.

  14. Nickel

    Tinyhands: Excellent point, and also something to think about if you live near, but not in a flood zone… Maps are often redrawn to change the flood zone boundaries even if the landscape doesn’t change, so… Keep in mind that the precise boundaries are really just a semi-scientific best guess, and you may want flood insurance even if you’re technically just outside of a flood zone.

    In fact, at our last house the maps were changed and we received notification that we were suddenly in the 100 year flood zone when we hadn’t been before. The funny thing is that all of the lower lying houses directly adjacent to us were *not* in the flood zone. Turns out the maps were redrawn with old data, and they were ultimately corrected to remove us from the flood zone once again. But… Mother Nature doesn’t heed these sorts of boundaries. From a practical perspective, you’re either going to get flooded or not, regardless of where you fall on a flood map.

    We bought flood insurance our first year in that house for peace of mind (we were technically in a 500 year flood zone, which doesn’t require insurance) but dropped it after witnessing the worst flood on record, and realizing that the water would have had to come up another 20 feet vertically from what was already a record level before it would even come close to threatening our home. Given the lay of the land, that would’ve required another 40 days and 40 nights of constant rain…

  15. Anonymous

    Floodplain maps are frequently redrawn by the Corps of Engineers, so buying a home that is near the floodplain may wind up being in the floodplain down the line. Mortgage lenders can and do have the right to require you to get flood insurance if that happens and your first notification may be a bill for said insurance. But you usually have the right to secure your own insurance which would almost certainly be cheaper, even if the mortgage company says that they’ve initiated coverage for you. Simply provide your insurance policy information and insist that they not charge you for their insurance.

  16. Nickel

    Chris: Most flood policies exclude damage due to wind-driven rain because that’s not actually a flood. Could this be what they were talking about?

    Regardless, your point is well taken… Read your policy and be sure you know what is and isn’t covered before signing on the dotted line.

  17. Anonymous

    I have a river in my back yard about 15 feet from my house, but I’m not worried about flooding. Even with the nor’easter that just came through, my basement was dry as could be and I still had about 20 inches before the water even reached my yard. That’s one advantage of having a dam at either end; the amount that comes in is limited, and there would have to be one helluvan obstruction downstream to get the water into my yard or up to my house.

    We do have flood insurance.

  18. Anonymous

    Check the policy. I was looking at some flood insurance (which I did not get because we are not in a flood plain) and found it amusing that the policy did not cover “Flood caused by rain or wind”.

    I’m not exactly sure what kind of flood the policy actually covered.

  19. Anonymous

    One of my friends lost all her stuff during the 14th Street Canal levee break in NOLA. She was storing her stuff in the basement of her parents’ home just a few blocks away. While her stuff wasn’t covered by her parents’ flood insurance, her parents were covered 100%. A few years ago they were offered the chance to up their flood insurance rider to $1.5 million and did so. They got their insurance payout, even though they lost everything.

    I guess my only helpful tip is to buy more coverage if you can get it. Her folks were so lucky to have that opportunity and seize it before disaster struck them hard.

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