Flooding can be devastating and causes billions of dollars in damages across the United States every year. Statistically, your house is much more likely to be flooded than suffer from fire damage. Flooding is the number one natural disaster in America, with the average flood claim between 2008 and 2012 a staggering amount of almost $42,000. A total of around $4 billion is claimed yearly.
National Flood Insurance Program
Congress created the National Flood Insurance program to reduce future flood damage through zoning ordinances and community-enforced building, while also providing access to affordable, subsidized flood insurance protection. Community involvement is also greatly encouraged in this program, which is based on an agreement between Federal Government and the local communities. The principle is that the community needs to enforce and adopt floodplain management ordinances to help reduce any future flood risks to new buildings in flood hazard areas and the Federal Government will provide financial support through flood insurance. The NFIP flood insurance can be purchased through casualty and property insurance agents at set rates, so the premium should not differ between companies or agents. Rates depend on the type of home construction, its age and the level of risk the building carries.
When is Flood Insurance Required?
Federally regulated lenders have been mandated by Congress to require flood insurance on all properties that are situated in high risk areas. This means that if you buy a property in a high-risk flood area and make use of a federally regulated or insured lender, you have to get flood insurance. High risk areas have a one in four chance of experiencing flooding every 30 years.
Businesses and homes situated in moderate-risk or low-risk areas are not federally required to have flood insurance. However, flood insurance is still highly recommended and many lenders will still require it. A quarter of all NFIP claims are filed by people in moderate-risk or low-risk areas, which shows the importance of being insured against flooding. Disaster assistance, when available, is usually a loan that you have to repay with interest. Websites such as moneytips.com can give you more information about your mortgage and whether your lender will require flood insurance.
What is Covered by Flood Insurance
Depending on your insurance plan, flood insurance may cover two types of property: the building itself and then its contents. The land it is located on is usually not covered. Building insurance typically includes the building with its foundation, the plumbing and electrical system, furnaces, and central air conditioning as well as water heaters. Built-in appliances such as cooking stoves, refrigerators and dishwashers are also covered under the building insurance. Flooring and permanently installed carpets are also included. Content insurance will cover personal possessions such as furniture, clothing, curtains, electronic equipment and portable appliances.
Changes to National Flood Insurance Program
After many people suffered devastating losses from Hurricane Katrina and Superstorm Sandy, new legislation was approved in March 2014 to roll back the NFIP to provide some relief to homeowners. The overall complaint was that homeowners living in flood-prone areas suffered sharp premium increases. The new bill is aimed at allowing property sellers to pass their subsidized, low insurance rates to new buyers, thereby limiting how much their flood insurance premiums may rise every year.
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