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Why Don’t You Buy Flood Insurance?

01.26.12

From Swingle Collins & Associates

Did you know flood is an excluded peril on most homeowners and commercial insurance policies? This is not a pressing concern to most people who live in a low or moderate flood risk area, but 30 percent of all flood insurance claims come from areas with minimal flood risk (source: http://www.floodsmart.gov). Hurricane Katrina was the most costly flood event in history causing over $17 billion in flood losses. According to the Insurance Information Institute, only 30 percent of homes in Louisiana are protected by flood insurance. In 2011, states along the Mississippi river suffered massive flooding not seen since the 1930’s which will cause an estimated $10 billion in flood losses. We watch this devastation and yet many of us think, “this won’t happen to me.” If you live at the bottom of a hill, a location susceptible to heavy rains and flash floods or have spring snow melts it is important to consider purchasing flood insurance. It is important to understand the definition of flood and the cost of flood insurance before rejecting the coverage all together.

So, what does flood really mean? The National Flood Insurance Program defines flood as, “A general and temporary condition of partial or complete inundation of normally dry land area from the overflow of inland or tidal waters, or the unusual and rapid accumulation or runoff of surface waters from any source.” Essentially this means, flood is an excess of water on land that is normally dry.

Flood insurance premiums are based on 3 major characteristics: amount of coverage purchased, deductible, and building characteristics such as location, age, and occupancy. Houses and buildings in less flood prone areas are charged much lower premiums than high hazard areas for the same protection and the annual premium can be as low as $150 a year. If you live in the 100 year floodplain or have a home financed with a company backed by the federal government, flood insurance is mandatory. Take the time to make an educated decision before passing on flood coverage all together.


posted by Rachel Meador on 01.26.12 • comments (0) • Risk Management