Why You Need Flood Insurance Outside of High-Risk Areas

Homeowners who live away from the shoreline might assume they don’t need to carry flood insurance, yet even low to moderate-risk areas can be exposed to heavy rain, snowmelt and spring thaw. These events can trigger flooding that causes a degree of property damage.

If you’re far from the coast, this scenario can catch you off guard in terms of preparation and financial consequences. As such, all homeowners are recommended to purchase flood coverage through the National Flood Insurance Program (NFIP) or a private carrier.

Whether you’re purchasing your first home, thinking about the long-term effects of climate change or simply want to better protect your property, learn why flood insurance can still be beneficial outside of high-risk regions.

1. Your Carrier and Lender May Require It

Lenders require anyone purchasing residential or commercial property in a high-risk region to carry flood insurance. Boundaries are based on the Federal Emergency Management Agency’s (FEMA) map.

Insurance carriers and lenders may take additional precautions. For instance, homebuyers in a low-to-moderate or indeterminate risk zone may be required to purchase flood coverage to receive a loan or obtain homeowner’s insurance. Those who qualify for a government-backed mortgage, such as an FHA or VA loan, typically find themselves in this scenario.

2. Flooding Doesn’t Just Happen on the Coast

An insurance carrier or mortgage lender may require flood insurance because this threat can occur inland. Flooding related to precipitation can also occur outside of high-risk floodplain areas and hurricanes are increasingly spreading beyond the shoreline area.

Reflecting this possibility, about 40 percent of claims filed each year through the NFIP involve properties outside of high-risk areas; 20 percent come from moderate-to-low risk zones, which receive about one-third of annual disaster assistance.

3. Homeowner’s Insurance Doesn’t Cover Flooding

Unfortunately, many homeowners fail to thoroughly read their policies or misinterpret them. One point of significant confusion is that policies cover water damage in select instances – for example, due to an appliance malfunction or based on where rain falls – but deliberately exclude floods. If you don’t realize this until it’s too late, you could find yourself with an unlivable property or have to pay for repairs and new belongings out-of-pocket.

4. Spring Thawing Is a Real Concern

According to the United States Geological Survey (USGS), as much as 75 percent of the water supply in the western United States comes from melting snow. In the warmer seasons, water is released into rivers and spring rain showers can cause these bodies of water to overflow, resulting in springtime flooding. Your home can be affected by water seeping in through your windows, doors or cracks in the foundation.

5. Most Homeowners Don’t Receive Federal Disaster Assistance

If a flood hits your area, many homeowners assume assistance will come from the federal government. Yet the reality is, most people won’t receive compensation to rebuild – even those in high-risk regions – due to the following factors:

  • Disaster assistance is only available if and when the federal government officially declares the storm or incident a disaster. This declaration is issued for less than half of all incidents.
  • Disaster assistance is not free. Aid comes in the form of a FEMA disaster grant of about $5,000 per household or a U.S. Small Business Administration loan, which needs to be repaid with interest. Property owners must go through an application process first to see if they qualify.

More homeowners receive assistance to rebuild through NFIP and private flood insurance policies than from disaster relief.

6. Renters Can Be Affected by Flooding

Renters insurance also does not cover flood damage. Unfortunately, many renters believe their landlord or property owner has flood coverage, only to later find out their policy does not extend to a tenant’s personal belongings.

Due to these risks, you’re advised to take out a flood insurance policy to protect what you own. For renters, contents coverage generally has a $100,000 limit.

7. Think About the Potential Damage

Even in a low flood risk area, think about the damage that could result. Destruction related to an inch of standing water costs about $25,000 to resolve! You will likely have to contend with additional costs related to:

  • Mold growth
  • Structural issues
  • Contaminated drinking water
  • Yard and foundational damage

8. Changing Boundaries

Although lenders follow the FEMA map, its outdated and currently doesn’t take into account inland storm progression. As a result, properties considered low to moderate risk may in fact be more flood prone than listed.

Are you thinking about purchasing flood insurance but find yourself on the fence? Contact your agent at HUB/Ion Insurance to discuss any concerns today.