The Benefits of Flood Insurance Versus Disaster Assistance

Only flood insurance covers flood damage. Without it, your recovery options are limited and costly. Your recovery will depend on your savings, your line of credit or the hope that a federal disaster declaration may make State/Federal disaster-related grants and/or U.S. Small Business Administration low-interest loans available.

If you live in a Special Flood Hazard Area that is at high risk for flooding, flood insurance is mandatory for residences and structures that have a federally-backed or insured mortgage. A home located within an Special Flood Hazard Area has a 26 percent chance of suffering flood damage during the term of a 30-year mortgage.

If you live in a low-risk flood zone, outside the 100-year flood zone, the decision to purchase is optional. That choice means balancing the potential risk vs. the cost of the protection.

To make the decision to purchase flood insurance easier for people in low- to moderate-risk areas, the National Flood Insurance Program (NFIP) established a Preferred Risk policy. It addresses two major insurance issues:

  • homeowners policies almost never cover flood damage and;
  • one-quarter of all flood insurance claims come from structures located in moderate to minimal flood risk zones.

 A low-cost Preferred Risk policy is ideal for homes in low- to moderate-risk areas. Homeowners can insure buildings and contents for the policy maximum of $250,000 for the structure plus $100,000 in contents for as low as $355 a year. Renters also can insure their belongings up to $100,000.

Business owners who hold a Preferred Risk policy can get up and running again more quickly if disaster strikes. Coverage starts at $550 a year for $50,000 building coverage and $50,000 contents coverage. If you lease your space, it costs just $145 annually for $50,000 just contents coverage.

For commercial (non- residential) buildings a combined total of $1 million of flood insurance coverage is available for the structure ($500,000 limit) and its contents ($500,000 limit.)

For all new policyholders there is a 30-day waiting period before the coverage goes into effect. For more information about the NFIP and flood insurance, call 800-427-4661, or contact your insurance company or agent.

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