Flood insurance is not something that many homeowners have, but they don’t necessarily know that they don’t have it. This is because flood protection is not a part of a conventional homeowners insurance policy. Most homeowners have to have insurance protection due to the provisions of their mortgage, but few people take the time to understand their policy and what protections it offers. As such, many people are often left at the mercy of natural disasters.
In the United States, flood insurance is within the jurisdiction of the federal government. This coverage is offered through the National Flood Insurance Program, which offers policies provided by private insurance companies. The program is managed by the Federal Emergency Management Agency, which determines the cost of flood protection and exactly what coverage such protection provides. As of 2012, the average cost of flood insurance coverage was approximately $650 a year.
Many people assume that their basic homeowners insurance policies offer coverage for flood damage, but this is not the case. Some question the importance of flood protection, considering this type of insurance coverage to be somewhat worthless. For those living in parts of the country where floods do not occur regularly, flood protection may be an unnecessary expense. For those living in coastal regions, however, flood protection may be a healthy investment.
In 2012, flood damage in New York caused more than $3.4 billion in insured losses. Some $3.2 billion in losses were reported in New Jersey. More than $500 million in losses were reported in Louisiana during that year as well. The National Flood Insurance Program paid billions out to policyholders in 2012 in the wake of major flooding disasters in many parts of the country. Without flood protection, homeowners affected by these disasters would have no financial windfall and would have to cover the cost of the damage themselves.
Determining whether flood insurance is worthwhile can be somewhat complicated. There is never a guarantee that you will actually use your insurance policy in any way. Considering the average yearly cost of insurance coverage, however, and comparing it to the cost of a natural disaster, insurance may be a very valuable safety net.