Goodspeed: Flood insurance is expensive, but may be needed more today
QUESTION:We are new homeowners. Our house is not located in a flood plain, but after watching all the flooding that happened after Ida, we are wondering if we should purchase flood insurance anyway?
ANSWER: Flood insurance is not required for most homeowners, which means most do not have it. The exception is the 20 percent of homeowners who live in high-risk flood areas and have a federally-backed mortgage. Their lenders require them to carry flood insurance, which most obtain through the Federal Emergency Management Agency’s (FEMA) national flood insurance program.
If it is not required, most homeowners will not purchase flood insurance. But lately, it seems we are witnessing more and more 100-year storms and rain events. In fact, 90 percent of natural disasters involve flooding. We certainly witnessed that this past summer, thanks to an unusually rainy summer, Hurricane Ida and the most recent Nor’easter, which flooded rivers and many basements.
Homeowners without flood insurance must pay for losses out of pocket, and with a warming climate, flooding and those losses are likely to increase. It is quite easy to make the case for buying flood insurance, but, of course, there is the cost.
You can purchase flood insurance coverage through your local insurance broker or through the federal program (www.fema.gov/flood-insurance; or 1-877-336-2627). Any homeowner, renter or business owner is eligible to purchase flood insurance through FEMA.
Currently, the average annual cost for flood insurance under the national program is $734. This is on top of the rest of your homeowner’s insurance coverage. And FEMA’s rates and rating system are changing next year, which will likely result in higher flood insurance premiums for many homeowners.
Coverage under the national flood insurance program is reliable, but limited with residential policies maxing out at $250,000 for the building and $100,000 for contents. And not all contents are covered. For example, if your basement floods, the insurance could replace walls, oil and hot water heater, but not personal items such as sofas, TVs, clothes, books, etc.
Private flood insurance generally offers more flexible coverage, but since prices are not set by the government, will likely cost more.
One note: If your sump pump fails or a municipal sewer line backs up into your home, the damage will not be covered by flood insurance or your homeowner’s insurance. You could add a separate rider to your standard insurance policy to cover these types of backups.
The reality is that flood insurance is actually more needed than fire insurance. Most homeowners would not dream of opting out of fire insurance. Given recent weather events and climate change, they should also seriously consider flood insurance.
Linda Goodspeed is a longtime real estate writer and author of “In and out of Darkness.” Email her at: email@example.com.