Homeowners Flood Insurance: What You Must Know BEFORE You Buy

After Katrina, homeowners and prospective homeowners are more aware than ever of the importance of flood insurance. With hurricane season right around the corner, following is some must-know information if you are thinking about buying a home.

According to FEMA, 90% of all natural disasters in the US involve flooding and 25-30% of flood insurance claims are from regions designated as "low-risk."

A structure located within a special flood hazard area on an NFIP map has a 26% chance of suffering flood damage during the term of a 30-year mortgage. (Source: FEMA.gov)

Following are some frequenly asked questions about flood insurance.

Who needs flood insurance? The National Flood Insurance Program (NFIP) defines flooding as "a general and temporary condition during which the surface of normally dry land is partially or completely inundated." That can happen anywhere after heavy rains, snow melts, or other events that trigger water release. It is precisely because of this that flood zones change all the time.

And, consider this: flooding is the most common natural disaster after fire. So, in short, almost every homeowner needs to check into flood insurance.

How much does flood insurance cost? The average flood insurance premium is about $370 a year. Your specific premium will be determined by such factors as where you live; how much coverage you choose; the age, elevation and structure of your home; the building occupancy; and the deductible.

Depending on where you live, your annual premiums could be even lower, eg, if you live in a single-family home located in a low-risk area, your policy could start at a little more than $100/year. And, both your home and contents are covered under one policy. Doesn't a homeowner's insurance policy include flood damage? No. This is one of the most common misconceptions about homeowner's insurance.

A homeowner's policy will cover things like wind and debris damage as a result of, for example, a hurricane. But, flood damage is not included. You need a separate flood insurance policy to cover flood damage.