Buying Flood Insurance
As an insurance agent I’d like to start by saying that if you reside in a locale prone to natural disasters like hurricanes or tropical storms you should probably carry flood insurance. Far too many folks believe their homeowner’s insurance will cover this. However that is not the case.

Let’s start with some simple information about flood insurance or the N.F.I.P. as it’s more commonly known. The N.F.I.P., which stands for The National Flood Insurance Program, started in 1968 and was enacted by Congress. Its sole agenda was to provide coverage for property owners in the case of floods.

This program isn’t exclusive to homeowners. Businesses and tenants can keep flood insurance as well. The one caveat is an individual or businesses community must be participating in the program. This is a simple agreement stating that a specific community has agreed to adopting and enforcing the codes established by FEMA to help mitigate flood risk and damage in case of a flood. FEMA rules are not overly burdensome to the community. The bottom line is this, a community has to first join the NFIP and enforce sound floodplain management standards.

Often I’m asked by clients about the cost of flood insurance. I usually point out that the cost of not having flood insurance can run into the tens of thousands of dollars from something as little as just one inch of water. Depending on the zone your property is located in the dollar amount may be insignificant for the peace of mind it provides.

The second thing you may want to keep in mind when it comes to buying flood insurance is surprisingly simple. Flood policies are transferable from a previous owner to a new owner. This is because you are insuring the property, while contents may differ the property and dwelling coverage will stay the same. Make sure this is adequate coverage for your personal property needs. You may consider a dwelling coverage adjustment as the previous insured retained some of the risk to help keep lower premiums.

Consider this when you’re buying flood insurance. Flood insurance rates are created dependent on several factors. The first consideration and probably the most obvious are the date and type of construction of your home. This is used in harmony with your dwelling’s level of risk i.e; what flood zone the dwelling is located in. The land your buildings or contents occupy is not covered. You cannot insure land.

What you’re getting from a flood insurance policy works like this. Say you have a flood, The NFIP says the dwelling coverage includes the structure, the foundation, plumbing, electrical, air conditioning and heating systems, permanently installed carpeting over finished floor, as well as built in appliances including stoves and refrigerators.

Secondly The NFIP says clothing, furniture, electronic equipment, curtains, portable and window air conditioners, portable microwaves and dishwashers, carpeting that is not already included in property coverage and clothing washers and dryers are included under contents or personal property coverage.

A flood insurance claim will use one of two valuation methods as established by The NFIP. The first method is called Replacement Cost Value (RCV) and the second is referred to as Actual Cash Value (ACV).

The RCV is the cost to replace a damaged dwelling. It is reimbursable to owners of single-family, primary residences insured to within 80% of the building’s replacement cost.

All other buildings and contents, referred to earlier as personal property, are valued at ACV. Actual cash value is the RCV at the time of loss with a proration for physical depreciation. Personal property is always valued using the ACV. This is all good information to keep in mind when you’re buying flood insurance.

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