Does everyone need flood insurance?

Does everyone need flood insurance?

By Jim Nolan, Jr. – president of Nolan Family Insurance, Inc, Punta Gorda, FL
Charlotte Sun-Herald Newspaper. Reprinted with permission. November 26, 2007

It seems that a week does not go by without at least one person telling us they don’t need flood insurance.

Their reason for this is usually either because someone told them they are not in a flood zone or they assume because they have a hurricane deductible on their homeowner’s policy, they are covered for flood damage if it is the result of a hurricane.

Both of these assumptions are incorrect and could prove very costly.

First, we live in a state that is surrounded by water on three sides, so when you enter the state of Florida you are entering a flood zone. When you are told by someone you are not in a flood zone or you don’t need flood insurance to get a mortgage on your home, it probably means that you are not in a Special Flood Hazard Area. Statistics show that between 20 to 30 percent of all flood losses occur outside a Special Flood Hazard Area. My own house is not in a Special Flood Hazard Area, but the house two doors down is in a Special Flood Hazard Area. Does this mean that if my neighbors have 3 feet of water in their house from storm surge, my house will be spared? I doubt it, so I carry flood insurance.

Because I qualify for a Preferred Risk Policy, it only costs $317 a year for the maximum coverage available — $250,000 on building and $100,000 for contents. Some companies also offer a discount on your homeowner’s policy, if your flood insurance is written with them. If your company offers this discount, it can decrease your total cost of protecting your home with a flood insurance policy.

Many people wrongly assume their homeowner’s policy covers any damage caused by a hurricane. We have many people tell us, “I have hurricane coverage on my homeowner’s policy.” There is no such thing as hurricane coverage, or a hurricane policy. Your homeowner’s policy, provided you have wind coverage, covers you for wind damage. So, if your home is damaged from wind as a result of a hurricane, you are covered. Homeowner’s policies do not cover damage from flooding, meaning rising water, including storm surge. If we have a hurricane and your home sustains damage from flooding, the only way you will have coverage is by protecting your home with a flood insurance policy.

We also see many people who are in a Special Flood Hazard Area, but are only carrying enough coverage to satisfy their mortgage requirements. This could also prove to be a very costly mistake.

First, flood insurance rates are tiered. You pay a higher rate for the first $50,000 in building and $20,000 in contents coverage. Adding additional coverage above these amounts can be relatively inexpensive.

Second, if your house is not insured to at least 80 percent of its replacement cost or the maximum building coverage available, $250,000, you could be faced with a co-insurance issue that can reduce the amount you are paid in the event of a claim.

Statistics show that a home located in a Special Flood Hazard Area has a 26 percent chance of being damaged by flood over the life of a 30-year loan. The chance of the same house being damaged by fire during the same 30 year period is only 9 percent.

Flood insurance is written through the National Flood Insurance Program and is administered by the Federal Insurance Administration part of FEMA. Flood insurance rates do not vary by company.

Flood insurance policies are different than your homeowner’s policies. I recently spent half a day attending a flood insurance continuing education course and it would be impossible for me to cover all of the intricacies and coverage of the flood policy in this space.

As always, I recommend you speak with your insurance agent and go over any questions you have on flood insurance, or any other insurance matters.

Oh, by the way, there is a 30-day waiting period on flood policies in most circumstances, so don’t procrastinate. Call your agent today.

Jim Nolan 941-639-1122
Jim Nolan, Jr. is president of Nolan Family Insurance, Inc in Punta Gorda, FL

James B. Mulligan, Licensed Real Estate Broker
Suncoasteam Realty Corp
PO Box 380503
Murdock, FL 33938

Jim Mulligan (941) 456-3034


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