You already have the basic insurance coverages on your home, including dwelling and contents. Now, it’s up to you to decide what other coverages you should add to your policy. Should you opt for earthquake protection? Sewer backups? Sinkholes?
These seem like opportune ways to cut costs by opting out. You’re already spending so much on your mortgage, why would you want to spend extra money to protect you from things that will never happen?
You may think of flood insurance in this manner, especially if you don’t live near water. However, you’re taking a huge risk if you’re bypassing flood insurance. The possibility of your dwelling flooding is higher than you think, and if you don’t have that security in place, you could find yourself up the creek — in more ways than one. The following are some of the reasons having flood insurance is imperative.
Reason one: Basic homeowner’s insurance doesn’t cover flooding
Insurers are very specific about what types of damages are and aren’t covered by homeowner’s insurance. Flood damage isn’t something under their umbrellas.
You probably have an HO-2 or an HO-3 policy, the two most common types of homeowner’s insurance. You might assume these are comprehensive, but they only cover very specific types of water damage. For instance, according to LendingTree’s consumer resource website ValuePenguin, rainstorm and plumbing damage could be covered, but floodwater collecting on the ground from the exterior moving inside won’t be. Even more comprehensive homeowner’s policies typically explicitly rule out flood coverage because it’s simply too costly for most companies to insure under standard policies.
Reason two: Flooding is more probable than you realize
If you don’t live near a body of water or in a tropical region, you’ve probably ruled out the need for flood insurance. But flooding can happen in areas that aren’t in proximity to lakes or oceans.
The Federal Emergency Management Agency categorizes areas into zones that identify which areas are more or less prone to flooding. Overall, they can fall under three zones: high risk (Zone A), moderate or low risk (Zone B) or improbable (Zone C). If you don’t live in Zone A, don’t assume you don’t need insurance. Although the chance of annual flooding in Zone B is between 0.2-1.0 percent, FEMA reports that over 20 percent of National Flood Insurance Program claims are filed in Zone B, and a third of payouts go to those regions.
Policygenius’s Homeowners Insurance Lending Center identifies some other regions in which your neighborhood might be flood-prone: areas at high risk of forest fires, densely populated urban areas or areas experiencing rapid snowmelt. These are places where the ground can’t handle large amounts of water, resulting in pools collecting above ground instead of being absorbed below.
Reason three: Flood insurance covers more than just new flooring
If you assume that you can just afford to pay for new carpeting if your house happens to flood with the money you saved on flood insurance premiums, think again. Flood damage goes far beyond simply messing up the flooring — and those costs can spiral out of control.
According to Policygenius’ Homeowners Insurance Lending Center, flood insurance covers more than just new flooring — because standing water can damage more than just that. Typically, flood insurance can cover furniture, appliances, electronics, window treatments, cabinets, debris removal, HVAC systems and even the foundation.
Flooding can cause a lot of irreparable damage to your house even if you don’t think you live in a high-risk area. Sump pumps won’t always keep water out, and even an inch of water can ruin your home and its contents. The best way to protect yourself from the costs of flood damage is to invest in the means to financially recover. In other words: flood insurance.