Whether you’re a homeowner or a business owner, it’s important to have at least basic protection against certain risks and liabilities. Therefore, you will likely be recommended to purchase either homeowners’ insurance or commercial property coverage. However, these types of policies don’t generally include flood coverage.
This is especially noteworthy because, according to Policygenius, 90% of natural disasters in the United States involve a certain amount of flooding, and 98% of all counties are affected by flooding. You may have wondered at some point whether you need this form of insurance if you live in an area that isn’t prone to flooding. Here is a close look at this subject.
Who Is Required to Carry Flood Coverage?
Flood insurance is only legally required in specific cases. Nevertheless, you should strongly consider buying a policy regardless of where your property is located (high-risk or low-risk flood zone), as this can offer you an added level of protection.
Both personal and commercial flood insurance policies can be purchased via the National Flood Insurance Program (or NFIP), which the Federal Emergency Management Agency (FEMA) oversees. High-risk flood regions are designated as “A” or “V” zones on FEMA’s flood maps. If you’re based in one of these areas and have a federally-backed mortgage, you must carry flood coverage. Some lenders in low-to-moderate-risk zones may also require their borrowers to have flood insurance.
Federal Disaster Assistance
If you’re located in a high-risk flooding zone and are a recipient of government disaster aid, you’re required to maintain flood coverage to be eligible for future assistance. This aid can take the form of either low-interest loans from the U.S. Small Business Administration (SBA) or grants from FEMA.
Nonprofits and agricultural businesses that have 500 or fewer employees qualify for SBA disaster loans. According to Floodsmart.gov, the average FEMA disaster grant is approximately $5,000 per household. For reference, the average flood insurance claim in 2018 was over $40,000 (down from $91,735 in 2017).
About the NFIP
If you’re a homeowner, the NFIP covers up to $100,000 for building contents (furniture, clothing, electronics, valuables up to $2,500, etc.) and $250,000 for your physical structure. For business owners, the limit is $500,000 for both coverages (equipment and inventory are included in contents coverage). This program offers replacement cost coverage for your house’s structure.
For belongings, the NFIP only provides actual cash value (ACV) coverage. This signifies that you can recover your possessions’ current value. This amount could be substantially lower than their replacement cost, especially if they’re old and have experienced depreciation over time.
How Much Does Flood Insurance Cost?
According to the Insurance Information Institute, the average premium for flood insurance in 2018 was $642. That year, the average amount of flood coverage equaled $257,000. However, there are multiple factors that typically influence the cost of flood insurance. These include:
- Your area’s flood risk
- Your property’s age and construction
- Your chosen limits and deductibles
- Your contents’ location (ground level or elevated?)
As with any other type of insurance, be sure to carefully evaluate your needs and budget before selecting a flood policy. You should also know that starting in October 2021, FEMA will introduce a new NFIP rating strategy known as Risk Rating 2.0.
This strategy is designed to determine flood insurance premiums more accurately based on more specific factors, such as proximity to water sources and the cost to rebuild a property. Part of the objective of Risk Rating 2.0 is to narrow the gap between flood insurance premiums for homes with different values (low vs. high).
Speak to the Flood Insurance Experts
Reach out to the professionals at JMG Insurance Agency to learn more about flood insurance and its benefits. Since 1916, we have been dedicated to serving the insurance needs of clients throughout Connecticut, New Jersey, New York, Hawaii, and Massachusetts and to building long-lasting relationships with these clients. As an independent agency, we work closely with several stable and reliable insurance carriers.
JMG works closely with the NFIP to offer both commercial and personal flood insurance. Our policies include building and contents coverage, so you don’t ever have to worry about your property not being protected.
The former coverage will protect your home’s structure, as well as your plumbing and electrical systems and HVAC equipment. The latter coverage will protect your furniture and electronics, among other things. For commercial policies, a 30-day waiting period often applies.
Call JMG Insurance Agency today at (844) 304-7332 or visit us online for more information about our flood insurance policies.