The 411 on Flood Insurance
Flood Insurance takes up where the standard homeowner insurance policy ends. Homeowners’ will not cover flood water damage and, as a consequence, property owners are encouraged to buy supplemental insurance to protect one’s assets from flood damage.
The National Flood Insurance Program (or NFIP) was put into effect in 1968 by Congress. This program has changed over time as a result of much devastation wrought by various natural disasters like so many destructive hurricanes in many states, such as Katrina in Louisiana. NFIP is under the auspices of the Federal Emergency Management Agency (FEMA) and ensures that coverage is available for all.
Obviously, there are certain regions of the country that have a much greater risk for flooding than normal. For example, properties that sit beside coastal areas or on rivers or lakes are more likely to experience water related damage from severe storms than a property that is located in a desert climate.
The NFIP is designed to mitigate the impact of flooding on properties by encouraging communities most vulnerable to flooding to put into effect food management strategies and to also provide affordable insurance for property owners in these susceptible areas. This is accomplished by working with private insurance companies to alleviate the costly risk of insuring these kind of properties in NFIP identified regions.
For example, if you buy a home in one of these identified floodplains, you would also buy NFIP insurance available from a private insurance company that would be similar to one’s homeowner’s insurance. Then, should disaster strike and your dwelling is damaged by a flood, you are protected.
When one is forced to file a claim due to flood damage, a part will be paid by the private insurance company and the other part will be covered by the NFIP. This keeps costs down by spreading the risk of loss between the government agency and the insurance provider.
When one has a loan on his or her property in an NFIP designated flood plain, he or she is mandated to obtain NFIP insurance by the lender. It is still often a good idea to consider this coverage even if not in a flood plain as the peace of mind alone can often justify the expense.