In addition to a standard home insurance policy, many homes may require insurance against flooding. Even if coverage isn’t not mandatory, a home buyer should weigh the cost and risk.
Your home may be the biggest investment you ever make, so you naturally want to protect it. Insuring your home will require some strategic planning, so we asked Red Rock Insurance agent John Lipscomb a very common question:
Do I need flood insurance?
“Flood insurance can become a large expense, so anyone purchasing a home should know if flood insurance will be required before the purchase,” says Lipscomb. “The buyer should know the flood zone rating when purchasing because it can significantly affect the value or salability of a property. The additional flood insurance can also add to your monthly expenses for the property.”
Risks and hazards are identified by FEMA based on maps and studies which indicate the land’s propensity to flood. A mortgage lender may require flood insurance on a home if it stands on a flood-prone zone. These maps feature floodplains as well as zones in which flooding would be extremely rare.
“Most homes are in a designated X floodplain which indicates that they are less likely to experience flooding in a span of 100 years,” says Lipscomb. “If a home is in a designated X zone, then generally a mortgage company would not require flood insurance.” It should be noted that the lender still has the right to set their own requirements as a condition of the loan.
“With that point made, many flood claims or occurrences are with these properties,” warns Lipscomb. It might seem frustrating to pay for flood insurance during the droughts we’ve seen in recent summers. However, when heavy storms bring flash floods, the deluge could cause damage that would only be covered by flood insurance.
Any other zone rating will obligate the buyer to insure their home against flooding. “If the home falls in any other designated flood categories, the mortgage company will require that you purchase an insurance policy specific to flooding in addition to the standard home owners policy,” says Lipscomb.
If you move into an X zone and still choose to play it safe, the lower risk may entail lower insurance costs. “If someone in the X zone does elect to purchase flood insurance, it generally cost less since there is a higher probability that no flooding will occur,” says Lipscomb.
If the home in question isn’t mortgaged, then it’s up to the property owner to weigh cost against risk and decide if they should opt for insurance. “The cost of flooding can be substantial, but there is no way to determine if the cost of the insurance would be more or less than the cost of the potential damage,” says Lipscomb. “Flood insurance can vary in cost based on the zoning of the property and frequency of flooding. In a zone X flood insurance may be less expensive and well worth the expense if there ever is a flood occurrence.”
If you have any questions about home insurance, you can reach Lipscomb at firstname.lastname@example.org. When you need to finance a home, we’re here to help.