Because purchasing a home is perhaps the largest purchase a family will make, virtually everyone goes through the mortgage process, which provides soon-to-be homeowners with the financial backing they need to purchase a residence. And because the investment is so significant, certain assurances are necessary as well. For example, people secure home insurance because it covers them should their property be damaged by weather or fire, and a new home inspection ensures them that the house is up to code.
All too often, however, people assume that they have all their protections in place when in reality they're not fully safeguarded. This appears to be the case with insurance coverage.
According to a recent poll conducted by FTI Consulting, approximately 45 percent of respondents said that they were under the impression that flood insurance was included in their homeowner's policy. However, only 15 percent said that they were certain of this, having purchased their plans through the Federal Emergency Management Agency's National Flood Insurance Program.
Loretta Worters, vice president of the Insurance Information Institute, noted that people who don't have flood coverage are setting themselves up for disaster, as approximately 90 percent of all natural catastrophes involve flooding. And if people think that flood coverage is included in their basic property insurance package, they're wrong.
As a general rule, flood insurance needs to be purchased separately through the NFIP, which is run by FEMA through most private insurers. With the protection in place, homeowners who are in low-lying areas will be protected and compensated should they encounter high-water levels.
The III provides current or prospective homeowners with some tips of what they should keep in mind when buying a plan.
For example, insurers determine how at risk properties are for encountering floods if they live inside a flood zone. As a result, an insurer may require a homeowner to purchase flood coverage when they secure their homeowner's policies. Individuals can determine whether they are, in fact, inside of a flood zone by getting in touch with their local legislator or government office.
Flood insurance awareness tips
Should homeowners realize that they don't have a policy place, they're encouraged to seek out one as soon as possible. That's because for most flood coverage plans, there's a 30-day waiting period before it goes into effect. In other words, if a flood happens within a month of when the coverage was first purchased, they likely won't be able to be compensated for the damage because the incident occurred within the 30-day time interval, III notes.
Another outlet that may be able to provide homeowners with some flood risk analysis is a home inspection company. Experts who review the property's physical structure may be able to tell whether the residence has the potential to encounter flooding, such as in the basement, and if anything can be done to solve the issue.