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Is the Cost of Flood Insurance Worth It? New Construction Homes for Sale in Burnt Hills NY. Todd Stewart of Stewart Construction Custom Home Builder in Burnt Hills NY.

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Home Builder with Stewart Construction Inc

Is the Cost of Flood Insurance Worth It?  New Construction Homes for Sale in Burnt Hills NY.  Todd Stewart of Stewart Construction Custom Home Builder in Burnt Hills NY.

Flooding risks, as well as the value of your home and your possessions, help determine whether the cost of flood insurance is worth it.

House with flood insurance

Homeowners may be required to carry flood insurance if their homes are in high-risk areas, called Special Flood Hazard Areas. Image: Alloy Photography/Veer

 Is the Cost of Flood Insurance Worth It?  New Construction Homes for Sale in Burnt Hills NY.  Todd Stewart of Stewart Construction Custom Home Builder in Burnt Hills NY.

Damage caused by driving rain is usually covered under standard homeowners insurance policies. Once the precipitation hits the ground, however, all bets may be off. Homeowners insurance typically excludes damage resulting from "seeping water, snow melt, rising bodies of water like lakes or rivers, and any type of rising ground water," says DonnaLyn Giegerich Zapcic, an insurance professional in Red Bank, N.J.

Flood insurance can fill that gap in coverage, but before you invest in it, take an hour or two to review your current homeowners policy. Based on your home's flooding risks and the value of your possessions, you might have enough protection already. If not, the cost of flood insurance averages $540 a year.

Is the Cost of Flood Insurance Worth It?  New Construction Homes for Sale in Burnt Hills NY.  Todd Stewart of Stewart Construction Custom Home Builder in Burnt Hills NY. 

How to get flood insurance

Getting flood insurance is the easy part. Homeowners can purchase coverage through the National Flood Insurance Program, so long as their communities participate. (Most communities do.) The program, part of the Federal Emergency Management Agency, will insure homes no matter the risk of flooding, though premiums will vary accordingly.
 
Homes located in the highest-risk areas, known as Special Flood Hazard Areas, may even be required by lenders to carry flood insurance, especially when the home is financed with a federally insured mortgage. Homes in Special Flood Hazard Areas have a 26% chance of experiencing flooding over the life of a 30-year mortgage.
 
Flood policies through this federal program are purchased from traditional insurance companies. Call NFIP at 1-888-379-9531 for a referral. The maximum coverage limit is $250,000 for damage to the building and an additional $100,000 for damage to the contents. The annual premium for a residential policy that covers contents only in a low-risk area can run as little as $39; the cost can approach $6,000 to cover the building and contents of a home in a high-risk coastal area.

Weigh cost of flood insurance vs. benefits

Start by assessing your home's risk of flooding, says Etti Baranoff, associate professor of risk, insurance, and finance at Virginia Commonwealth University. Has your neighborhood flooded in the past? Homeowners can view FEMA flood maps online.

Once you have a good handle on your risk profile, consider the potential loss you would sustain in case of a flood, says Baranoff. The average flood claim is $33,000, according to NFIP, but even an inch of water can cause thousands of dollars' worth of damage to a home and its contents.

Damage done by an inch of floodwater

Replace carpet, flooring $2,700
New baseboard molding $2,250
Replace drywall $1,350
Cleanup, materials $1,000
Bookshelves, lamps $500
Total $7,800

Source: National Flood Insurance Program

"Look how many people buy the insurance coverage on their cellular phones...when it's a major catastrophe that can really cost you," Baranoff says. "If you're the type of person who buys the cellular phone insurance, you want to be sure you're acting within your risk tolerance."
 
To get an idea of your liability, take a day to create a home inventory of your possessions, as well as estimate the cost of repairing or rebuilding your home. You might even find that the NFIP policy limits are inadequate. If so, check with your agent about rates for private flood insurance.

Additional flood resources for homeowners

Uncle Sam offers other assistance to homeowners who may become victims of flooding, in addition to flood insurance. Take taxes, for instance. The IRS will give some flood victims extra time to file returns, and it may be possible to take tax deductions for flood losses. Read IRS Publication 547, "Casualties, Disasters, and Thefts."
 
If flooded homes are located in declared federal disaster areas, homeowners may be eligible for low-interest loans through the Small Business Administration. (You don't need to own a small business to qualify.) It's possible to get up to $40,000 to replace or repair clothing, furniture, cars, or appliances, and up to $200,000 to repair or replace primary residences to pre-flood condition.
 
One quirk to keep in mind when it comes to SBA assistance: In high-risk areas, aid may be contingent upon a homeowner already having flood insurance. Because of this, SBA assistance shouldn't be construed as a fool-proof safety net.  By: Gwen Moran

Is the Cost of Flood Insurance Worth It?  New Construction Homes for Sale in Burnt Hills NY.  Todd Stewart of Stewart Construction Custom Home Builder in Burnt Hills NY.

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