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How much flood insurance coverage should I get?

How Much Flood Insurance Do I Need?

How much flood insurance coverage should I get?
Flood damage in Madison by Jim Gade via Unsplash

Homeowners insurance protects your home and you from most risks that could damage your home and leave you financially strained. Under your homeowners policy you are protected from fire, debris, electrical malfunctions, and much more. You’re not covered, however, for external flooding.

How do you protect yourself from flood and water damage? You’ll need to purchase a separate policy from your insurance company for flood protection. Flood insurance is one of the most important added coverage options a homeowner may need and if you find yourself without flood insurance and are struck by a flood, you’re staring at a major financial loss.

Many areas, specifically high-risk areas, will require you to purchase some form of flood insurance. Even if you’re not in a high-risk flood area, most mortgage lenders will recommend or require you to find flood insurance to protect both you and them.

Find the flood insurance right for you

But how much flood insurance do you need? Well, there’re many factors that come into play when deciding the best coverage options for you. We recommend at the least covering the cost to rebuild your home – this is different from the market value of your home. This amount can differ based on local labor costs and what materials are required to rebuild your home.

Finding out how much it will cost for a full rebuild of your property is an important first step to deciding which policy to go after. The second important step is to find out how much all your belongings inside your home is worth. Industry experts recommend the insurance you purchase is enough to cover the cost to rebuild your home as well as the cost of your belongings. This will protect you if your home is destroyed and your belongings along with it.

Something to consider, however, when finding the best flood insurance policy for you is maximum insurance costs. The National Flood Insurance Program (NFIP) is where most insurance policies will come out of. They offer you a base policy that will protect your home and satisfy most mortgage lenders. The one drawback of the NFIP is they, along with many private insurance companies, will offer you a maximum amount of coverage for your home.

  • NFIP Maximum coverage amount on your house reaches up to $250,000
  • NFIP Maximum coverage amount on your belonging is $100,000

If you have belongings that break the $100,000 maximum it may be beneficial to search for private flood insurance companies to cover individual items that are more expensive. Find a specialty flood insurance policy to protect your $5,000 art collection so you don’t go past the largest coverage.

Some private insurance companies will offer higher coverage amounts in general that could leave you insured up to $500,000. Find the insurance policy that best protects you and your belongings leaving you covered in the aftermath of a flood.

Required flood insurance

Often times if you live in a zone that has been designated Special Flood Hazard Area (SFHA) you may be required by law to own flood insurance. Two factors will come into whether you need a policy or not: Do you live in a high-risk area, and do you have a mortgage. If both factors are applicable to your situation, then chances are you must have a flood insurance policy.

If your mortgage lender is backed by federal financing then you will be required by the National Flood Insurance Act to be covered by a policy. Research your area to see if you are in a high-risk area. Generally speaking, if your neighborhood has a 1% chance of flooding, you may be mandated to buy flood insurance.

Whether your mortgage lender is backed by the government or a private lender, you can satisfy these requirements by purchasing a policy from the NFIP program mentioned earlier. Their insurance policy will allow you to be covered in the event of a flood up to a certain amount. If you decide to purchase from a private insurance company, you may need to check with your lender to see if their policy satisfies their requirements.

While only a minimum amount of insurance is required by law, it’s highly recommended you purchase enough coverage to properly protect your home and belongings.

Flood insurance can be expensive, but it’s a necessary protection when it comes to your home. If you live in a high-risk area for flooding, flood insurance is probably mandatory. Even if it’s not required that you have a policy, it’s highly recommended as you never know when a flood will spring up and leave you with hundreds of thousands of dollars in repair costs.

Cover yourself and your home and protect yourself with the flood insurance best suited for you.

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