Flood Insurance: Be Prepared for Rising Waters & Changing Rates

This week, Craig Siminski, of CMS Retirement Income Planning, shares an article discussing a new flood risk-rating system that could help homeowners assess actual risk and set more appropriate insurance premiums:

Water damage to your home from a leaking pipe, a broken dishwasher, or a hole in your roof — water that comes from the top down — is typically covered by your homeowners insurance policy (up to your policy limits). However, damage from water that enters from the ground up is excluded from most homeowners policies and requires a separate flood insurance policy.

To be considered a flood for insurance purposes, water must cover at least two acres or affect two properties. Typically, there is a 30-day waiting period before flood coverage goes into effect, so property owners should not wait until there is an imminent threat to buy flood insurance.

Ninety percent of natural disasters in the United States involve flooding, causing billions of dollars in annual losses. Most flood coverage is provided under the National Flood Insurance Program (NFIP). Homeowners who currently have (or may purchase) a flood policy should be aware that the NFIP has rolled out a new risk assessment model, as this change is expected to have an impact on premiums. Looking ahead, higher insurance costs could be an issue for anyone who aspires to own a coastal or waterfront home.

Mortgage lenders require flood insurance for homes in designated high-risk zones. Even if you own your home outright or do not live in a flood-prone area, you may want to consider coverage. About 20% of flood insurance claims are in low- to moderate-risk areas.

The Federal Emergency Management Agency (FEMA) calculates the degree of risk in your community based on assessments of rainfall, topography, tidal surge, flood control measures, and other variables. Under the old system, flood insurance premiums were based on…

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Craig Siminski is a CERTIFIED FINANCIAL PLANNER™ professional, with more than 24 years of experience. His goal is to provide families, business owners, and their employees with assistance in building their financial freedom.

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