I have seen a TV ad for flood insurance, and I have some questions.
It appears that if you live in a flood plane, you are strongly encouraged to get flood insurance. This insurance is subsidized by the Federal Government, correct? I assume that if your house is located next to a river that floods, or near the ocean in hurricane country, your bank will not give you a mortgage unless you prove that you have national flood insurance.
Is my premise correct so far? If so, how could someone NOT have national flood insurance? Can I drop it at any time after I secure my loan, or will I have to carry it until the mortgage is paid off? I assume it is highly recommended that I keep flood insurance once I have it. But it appears I can cancel it if I don’t want it, correct?
If the Govt is subsidizing flood insurance, why isn’t everyone forced to pay for it if they are in a flood area? If I cancel my policy and a hurricane wipes out my house, am I SOL or dies the government help me out anyway?
You borrow money from the bank. The bank got the money from… well, if they got it through Fannie Mae or Freddie Mac (federally insured), that lets the feds issue rules about that money. One of those rules is that if the bank is going to lend it to you, and you’re in a designated flood hazard area, the bank must require you to get the flood insurance. So, two things are involved: you borrowed federally insured money, and you’re buying property in a flood zone. If either is not so (but I’ve got no good idea how you’d avoid the first one), you don’t need the flood insurance.
Can you drop it after you secure your loan? No.
The federal govt also says that if the local government participates in their flood damage prevention program, the federal government will subsidize the flood insurance if the local government will demonstrate that it’s doing such things as adopting a building code that will encourage floodproofing and raised floor slabs, among many other opportunities for points.
Now, maybe you’re not in a flood zone or you don’t have such a mortgage. But maybe you want to buy flood insurance anyhow. It’s still available, and if the local goverment is participating in this program, it’s also subsidized by a percentage.
The bank won’t let you cancel your flood insurance - I think they’ll buy it for you and bill it to you, if they must. If there’s some legitimate way you don’t have flood insurance, you of course can’t collect on it. The government at various levels will still at least do some flood protection things for you, if only because they can’t very well build a levee system that protects every house but yours - oh, and they’ll pull you out of the river, if they get there in time.
One other thing. Even if you don’t live in a flood plane, your standard homeowner’s insurance may not cover flood damage. There have been a number of battles with insurance companies around here over things like damage from overflowing sewers or drainage canals that the insurance company defines as “flooding.”
Actually, most HO policies have a catch-all exclusion that covers flood, overflow from a body of water and/or groundwater, etc. Since many or most homeowners do not need flood coverage, it’s probably a good thing flood is excluded by a HO policy because otherwise, our premiums would probably double.
That isn’t quite correct. Standard homeowners insurance never covers water damage if the water originates from outside. If there is a heavy rain and water fills up the back yard and seeps in to the house-better have flood insurance. Outside of certain parts of a desert, there is no place in the country where one doesn’t need flood insurance.
Just living in a designated flood plain doesn’t mean you’re required to have flood insurance. We live in an area that is designated as within a flood plain but our particular bit of property is very unlikely to flood. We never had flood insurance until last spring, and we only got it then because we found out we were eligible for the national program and we’re getting old and paranoid.
We did look at one house before we bought this one that would probably require flood insurance in order to mortgage it. It was about 50 feet from a small river, and the foundation walls had many tiny waterfalls coming through them. There were 2 sump pumps in the basement and that’s all, because it was unsuitable for storing anything other than fungi. We’ve been in our house almost a decade and that riverside house is still for sale.
I saw some homeowners complaining a while ago on TV. It sems flood insurnace is what covers “overland flooding”. Sewer backups, broken pipes etc. are homeowner’s insurance (check your policy). The municipality had a bylaw that exempted it from damage due to broken water mains. A massive one broke near these houses, and the water flowed about a foot deep around the house. Because the water came in a basement window, it was considered “overland” If it had seeped in through foundation or basement wall cracks, or fountained up the drainhole, that would have been covered. They did not have flood insurance because they were not in an area prone to natural flooding; but it was not covered because other areas of the city were likely to flood.
Generally, IIRC, if your area is prone to natural disaster, the insurance company will separate out that event - tornadoes, hurricanes, floods, earthquakes - and charge you a separate insurance fee for that coverage. Supposedly this extra cost is relative to the risk.
I assume you are discussing some government-backed scheme? Usually, if you are on a flood plain, the rate from private insurance is so high that nobody can reasonably afford it, and the government comes up with some plan that helps reduce the eventual cost of what might otherwise just be disaster relief.
My understanding was that flooding was defined as “rising water” and that below-grade items (heater, water heater, washer/dryer etc. in a basement) will not be covered by flood insurance. I could be wrong though.
I’m in a low part of my street in a basement apartment. And I had flooding (from exess rain) twice in the five years I lived here, and the previous tenant had it twice too.
The best thing I have done is floodproof my home. I have tiles with high skirting (made higher then commercally offered by cutting the tile) and extra high stone thresholds. All furniture has been flood proofed. I put it on high rolling wheels so it is elevated and I can roll it away if the water comes. I have loose carpets I can hang out to dry after a flood; curtains instead of drywall partitions.
All of that helps with reducing damage and reducing the time consuming aftermath repairs.
After Hugo devastated Charleston in 1989, most companies refused to issue flood insurance for any property east of Hwy 17. Nationwide continued to offer it to us (a condo development) for a much increased premium. The federal government does not subsidize any flood insurance policy that I am aware of.
FEMA insurance has two options; one that covers the house and anything that is physically attached to it (furnace and water heater yes, washing machine no) and a much more expense one that covers property. Neither are cheap. Good luck finding cheap flood insurance if you do not live in a designated FEMA flood plane; sure they offer it, but is expensive.