The National Flood Insurance Program and Home Insurance

Home insurance provides financial protection against damage to your home caused by disasters and protects your possessions. Typical standard homeowners insurance provides you four areas of coverage -- the structure of your house, your belongings, liability and expenses in case you are temporarily forced from your home because of an insured disaster. Protection against natural disaster is part of home insurance, but it’s possible to live in such a high-risk area that your home insurance provider will refuse to cover certain potential calamities. In fact the natural disaster of flooding is not covered under standard home insurance, and if your home is located in a high-risk zone for flooding your insurance provider might not even offer you any level of flood insurance.

The National Flood Insurance Program

Congress created the National Flood Insurance Program (NFIP) in 1968 to ensure property owners could financially protect themselves against flood damage. If the structure is located in a participating community, NFIP’s flood insurance is available to homeowners, business owners and renters. The program is administers by the Federal Emergency Management Agency (FEMA). NFIP flood insurance is purchased through private insurance providers, but the rates are set by factors including the age of the structure, the type of structure and the level of risk the building faces.

Flood risk criteria

Buildings considered high-risk face a one percent or greater chance of flooding in any given year. This translates to a 26 percent chance of flooding over a 30-year mortgage. Homes and other buildings with federally regulated or insured lenders located in a high-risk area are required to carry flood insurance. Structures in low-to-medium risk areas typically aren’t required to carry flood insurance, but it’s a good idea because around a quarter of all flood claims originate from low-to-medium risk flood zones.

Did you know? Your mortgage lender can require you to carry flood insurance even if it’s not required by law.

Takeaways:

1. Standard home insurance typically does not cover flooding.
2. The National Flood Insurance Program offers flood insurance to homeowners, business owners and renters in participating areas.
3. About 25 percent of all flood insurance claims originate from low-to-medium risk flood zones.

An independent online resource is the fastest and easiest way to have home insurance providers competes for your business. Click here if you are ready to start comparing home insurance quotes from multiple providers.