Flood Insurance: Is It Right for You?

Why swimming in your kitchen is a bad thing

Unless you think you're a really lucky person, according to the National Flood Insurance Program (NFIP), everyone should have flood insurance. While many areas of the country are in low-risk flood zones, everyone is at some risk for an unexpected excess of water. About 25 percent of the flood insurance claims that are made to the NFIP are from low- to moderate-risk flood zones, proving that it is possible for nearly anyone to have a flooded home.

If you live in a high risk flood zone, your chance of a flood during any given year in a 30-year mortgage is 1 to 26 percent. According to the Federal Insurance Administration, approximately 75 percent of homes in areas that are most vulnerable are not insured.

Although many families do not want to pay for flood insurance, it is not an expensive cost. In 2000, the average premium for federal flood insurance was $353 per year, with policies starting at $112 per year. The average amount of insurance purchased was $124,089.

When more people purchase flood insurance from the NFIP, it becomes more affordable for everyone involved. The NFIP is not federally funded; rather, it is financially supported by insurance premiums. When there are more policy-holders, the premiums remain low.

If you were to consider taking out a loan for any flood damages, consider this fact provided by the NFIP website: taking out a loan for $50,000 with a 4-percent interest rate will have you paying $240 ($2,880) per year for the next 30 years. A policy from the NFIP that costs $500 per month could cover around a $100,000 insurance claim.

If you are thinking about purchasing flood insurance once you hear that your area is likely to flood, forget about it. Flood insurance takes 30 days to take effect and would not be much help when purchased three days before your home floods.

More information on flood insurance