Flood Insurance, Recent Changes, and Do You Need It?

Yep, it’s hurricane season again. 2.3 million properties in FL have a 26% or greater chance of flood damage, that’s 36% of ALL properties! The last hurricane season delivered a lot of flood misery in my area. The water inundated the end of my street and took over a month to recede.

How does flood insurance work?

Flood insurance covers properties in case of a flood, obviously (note: it does not cover sewer backups, water leaks, or moisture-related issues – insurers consider those issues water damage and are covered by a regular homeowner’s policy.). Flood coverage needs to be purchased separately from your homeowner’s insurance. It covers losses due to flood-related damage to homes and contents. Check out the state of Florida’s nifty guide to myths and facts about flood insurance.

Where do I find a policy?

NFIP (National Flood Insurance Program – part of FEMA) offers most policies, but some private insurers offer policies as well. How much does it cost? In the past, it depended on where you lived. Of course, homes in areas prone to flooding paid a higher premium. Find your home in relation to a flood zone here. Presently, if you have a mortgage and live in a flood-prone area, you are required to get flood insurance. Here’s a link to a site that can help you find insurers for your area.

New Legislation

Recently the government made big changes to the flood insurance program. NFIP transitioned to new flood zone legislation on May 1st called Risk Rating 2.0. Now homes are assessed individually rather than by flood zone. Current technologies more accurately measure multiple flood risk variables and property-specific characteristics, including elevation, distance to water, and cost to rebuild. Basically, this means property owners pay for only their own individual risk and no one else’s, making the program more equitable and perhaps lowering premiums for some homes. This sounds like good news for those with a required flood policy.

Is it worth it?

For those of us who aren’t required to have flood insurance, you might want to check out the cost of a policy. I got a little nervous when I watched flood water from Ian creep up my street last fall. It might give you some peace of mind to have a policy. Find a full explanation of Risk Rating 2.0 here.

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What is Private Mortgage Insurance or PMI?

When a buyer makes a down payment of less than 20%, the lender considers the buyer a higher risk. Private Mortgage Insurance (PMI) protects the lender in case the buyer stops paying the mortgage.