With our history of floods in this country you would be shocked at the number of people who just don’t think that they need to purchase flood insurance. Some of the reasons they give are:
• I live in a low risk flood zone;
• We have never had a flood in my neighborhood;
• I only insure against what is likely to happen;
The truth, however, is that anyone can be at risk for a flood. You don’t have to live in a high risk area to have a claim and the National Flood Program says that people outside of what is deemed to be a high risk area account for 25% of all claims and 33.3% of all disaster assistance. In addition, let’s keep in mind that disaster assistance is a loan and loans have to be paid back to the provider with interest!
Also, some causes of flood are the result of poor drainage systems, rapid accumulation of rain, melting snow, broken water mains, not just over flow of bodies of water, as commonly believed. For properties built on hillsides there is always the danger of mudflows which can also damage property. Did you know that mudflow is covered under the Standard Flood insurance policy?
Many people get so annoyed when they go to buy a piece of property in a high hazard area and the mortgage company requires that they provide a flood policy. What they don’t realize is that statistics concur that during a 30 year mortgage, there is a 25% chance that an insured will sustain a loss from flooding. Since banks and mortgage companies aren’t charitable institutions, and want to maintain their backing as federally regulated lenders, they will always err on the side of caution. Even in moderate to low risk areas, the flood insurance may not be mandatory, however a lender can still require that it be purchased. And should the maps be revised during the life of the loan and your property is now in a high risk area all bets are off. You will be getting notice that you must now purchase flood insurance or risk having the mortgagee purchase forced coverage for you at a much higher price. And, there have been instances where the loan was actually called in.
So all in all, it certainly makes sense to me that before saying “no” to a Flood policy, suggest that you say “yes” to investigating the actual risk to you and your family. Your first step is to call your insurance agent today.
Karen Skoler, CPCU