Home insurance policies often pay out claims only on explicitly named covered perils, and one peril that is rarely covered is floods. Here is what you need to know about flood insurance.
Flood insurance is a separate policy
Only in very rare cases is flood insurance included in a homeowner’s policy. If you live in a flood prone area, it’s vital that you take out a flood insurance policy. Keep in mind that with changing weather patterns, even currently safe areas could change in the coming decade.
Not all flooding is covered
When referring to floods, insurance companies mean acts of nature—heavy rainfall causes a river to overflow or perhaps a dam breaks and floods an entire area. Flood insurance will be ineffective if the flooding is caused by pipes breaking or sewer back-ups.
Sometimes flood insurance is required
If you are taking out a mortgage on a property in a high risk flood area, you may be required by the lender to have flood insurance on the property. In some cases, even if there is a moderate risk, the lender may require coverage. Be certain to speak with your mortgage lender about this issue so you know what policies you need.
Flood insurance rates are stable
With some types of insurance, it makes sense to shop around between providers, but not with flood insurance. Flood insurance rates are set at the federal level and are based on things like the date the building was built, the type of construction used and the level of flood risk.
The policy does not go into immediate effect
In the majority of cases, your flood insurance policy will not go into immediate effect. The exceptions to this rule are when a lender requires the coverage, if the additional coverage is part of renewing a policy, and if the new coverage is based on map revision. In all other cases, the property owner must wait 30 days for it to go into effect.
Do you need flood insurance for your property? Speak with your insurance broker about your options.
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