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Do You Need Flood Insurance?



Many Americans need flood insurance as a required condition of their home loan. But unlike auto insurance, flood insurance isn’t required simply because you own property. In these cases, flood insurance raises the same question as other insurance policies do: When does the premium outweigh the actual risk? Paying an annual premium may seem unreasonable if it’s for coverage you don’t think you’ll use.

Flood damage isn’t normally covered under most homeowners’ policies, and many can do without this benefit or can afford to pay for an incident involving this type of peril. Here’s what to do if you choose that route-and how to save if you do want flood protection.

Can you do without it?

If flood insurance isn’t required as a condition of your mortgage, you’re not obligated to have it. However, even a small amount of flooding can have dire financial consequences. According to the NFIP (National Flood Insurance Program), one foot of water could cause almost $30,000 of damage to a 1,000-square-foot home, and the average claim is more than $35,000. Moderate-to-low-risk areas still receive one-third of federal disaster assistance for floods.

That being said, if you live in a low-risk zone, you might want to weigh the cost of coverage against the likelihood of having to file a claim. If your area has never sustained serious damage, and you’re thinking of dropping your plan (or not getting one in the first place), you should still set aside money for potential repairs.

Consider having the amount you’d pay in premiums automatically deposited each month into a high-yield checking or money market account. This will get you better returns than simply saving your cash and with little risk.

Unless you’re certain you could financially weather a major flood, do not take the decision about coverage lightly. Get estimates for potential damage and consult with a financial planner or representative from your bank to see if this coverage is something affordable for you.

Feel free to call or visit Putnam Record Agency for more information on Flood Insurance and for advisement as to whether or not having this type of coverage is in your best interest.


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