Floods are unique among disasters in that they can affect very large areas (sometimes spanning multiple states) and flood damage can nearly guarantee complete losses on most property in an affected home. Flood insurance is for when the truly worst happens to your home. It won’t bring your mementos back, but it can help you rebuild your life after loss.
Depending on where your home is located, flood insurance may be required by law. And even if it’s not required, it may still be a good idea to have: up to 20% of all flood relief requests come from areas that are not considered “high risk” for flooding. For these reasons, your mortgage lender may require you to buy flood insurance.
The amount of flood insurance coverage required by the Flood Disaster Protection Act of 1973, as amended by the National Flood Insurance Reform Act of 1994, is the lesser of the following:
- The maximum amount of NFIP coverage available for the particular property type,
- The outstanding principal balance of the loan, or
- The insurable value of the structure.
On October 1, 2013 numerous changes in the National Flood Insurance Policy came into effect:
- For those who have policies written or renewed after October 1, 2013, will see on average a 10% increase on their premiums
- A Reserve Fund Ratio will be applied to each National Flood Insurance Policy (NFIP), expect for Preferred Risk and Group Flood policies. The reserve fund ratio accounts for about 5% of your total premium.
- The Federal Policy Fee will also increase for policies written or renewed after the October deadline. For Non-Preferred risk policies, it will increase from $40 to $44, and for Preferred risk policies, it will increase from $20 to $22.
- For those who are in a flood hazard area, and do not have flood insurance, there is now a 30 day waiting period. The NFIP has now eliminated the no waiting period due to lender requirement.
- The preferred risk policies issued under extension program, will now see an annual increase of 20%.
- The pre-firm will see an increase of 25% above the rates, in effect on or after October 1, 2013.
- For Properties in flood hazard areas and Zone D, who have policies that are lapsed or new, will not receive an extension of subsidy.