Flood insurance is specifically tailored to shield the property, its framework, and stored possessions from dwelling-specific losses and destruction inflicted by flooding, rains, melting snow, clogged drain lines, and others. The cost has to do with the property type, dimensions, area, and other individual factors.
Flood insurance provides financial support to the policyholder in the event of property loss due to flooding. The cost associated with this type of policy often depends on the location. To determine which areas are likely to experience heavy flooding, insurance companies use topographical maps. These maps show areas that are floodways and lowlands. That helps to see if a location is in an area prone to floods.
Many homeowners do not realize they need flood insurance, assuming flood damage is included in a traditional home insurance policy…which is completely wrong, as this coverage is separate.
About 20% of people in the U.S., who own homes at risk for flood damage, have insurance for floods. The low number is probably because the homeowners don’t realize they need separate coverage for floods.
A traditional home insurance policy relies on the economic principle of large numbers to charge policyholders small amounts of money. The money is for paying claims of the group of policyholders who suffer damage or loss. The number of people making claims is generally small compared to some other types of insurance. However, with flood insurance, the number of people making claims outnumbers the number of people who want flood protection.
In most cases, insurance companies don’t project making a significant profit by providing flood damage coverage. If that’s the case, then the homeowner has to look elsewhere for flood insurance.
In parts of the U.S. prone to floods, the federal government requires insurance that protects against flood damage. This requirement is for the security of FHA and VA mortgage loans.
People with a home mortgage should buy a separate flood insurance policy. They can buy it from a private company as long as it is one of the National Flood Insurance Program distributors.
Victoria is a Content Writer at American REIA, covering the latest industry news and various insurance topics, including auto, home, health, and life insurance.