Myth 1: You must live in a flood plain to get flood insurance
Not true. If you do live in a flood plain,
your mortgage company is very likely to require you to buy flood
insurance. However, if you don't live in a flood plain, an insurance
company isn't going to deny you coverage.
"Almost
anybody can get flood insurance who wants flood insurance," says Chris
Hackett, director for the Property Casualty Insurers Association of
America.
In fact,
if you don't live inside a flood plain, flood insurance really isn't
that expensive. The price that you would pay is determined by the federal flood insurance
program. The average price for flood insurance is about $600 annually,
Hackett says. What happens if you live in a town-home or condo, or you
rent your home out? In this case you can buy flood insurance for just
your possessions. However, do note that flood insurance wont help you if
your home is already flooded since there is a 30-day waiting period
between when you buy the coverage and when it kicks in.
Some people learn the hard way that just because an area doesn't normally flood,
doesn't mean it can't flood. High-risk areas are required to have flood
insurance for a reason, but low to moderate risk areas can still have
major flooding, so it is better to be prepared.
Myth 3: Flood insurance covers everything
This
isn't always the case. "When it comes to the physical structure of your
house, federal flood insurance policies top out at $250,000," Hackett
says. "If you have a $300,000 house that's a total loss because of a
flood, the most you can recoup through the program is $250,000 to cover
the structure itself. For your personal possessions, the cap is
$100,000 under the federal program. [That is] definitely something you
should keep in mind before purchasing a high-value home in an area
that's susceptible to flooding," Hackett explains.
If you
already have insurance through the federal program, then you can buy
"excess flood insurance" through a private carrier that would cover
claims above the national limits, Griffin says. It won't cover anything
in a basement (other than your heating and air-conditioning system),
or any living expenses if you have to relocate while your home is being
repaired, he says.
Myth 4: My homeowners policy covers floods"Unfortunately, a lot of folks may be under the impression that their standard homeowners policy might cover flood damage," Hackett says. The problem is, most standard policies don't. Standard homeowners policies do not cover earthquakes or floods, so if you want coverage for either of those disasters will need to pick up a separate policy.
Myth 5: Water damage is water damage
When it
comes to your insurance coverage, not all water damage is the same. "[If
there's a storm and your] roof comes off and water comes through, that
would be covered under your homeowners policy," Hackett says. "Versus a
flood situation where the riverbank overflows and you look out of the
front of your house and you need a boat to get from point A to point
B."
Some
homeowners policies offer an optional "water-backup endorsement" that
covers damage from water backing up into your home from causes such as a
broken sump pump, but normal flood coverage policies and homeowners
insurance policies do not cover those.
Myth 6: Flood plain maps don't changeFlood plain maps change and evolve quite frequently. Just because you weren't in a flood plain when you bought your home a few years ago doesn't mean you're not in one now. There are a few ways you can find out about your flood risks and if you may be in a flood plain, and vice versa. First, go to FloodSmart.gov because this site allows you to put in your address and see if it's in a flood plain, and give you information on risks and premiums. You can also contact your current home owners insurance agent and ask whether your home is in a flood plain, and what type of additional coverage you can get.
Sources: Yahoo, NOAA, Floodsmart.gov, Bankrate.com
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