Understanding Flood and Wind Damage Insurance

August 29, 2012      

As the Gulf Coast braces for hurricane-force weather, you may be wondering how flood and windstorm insurance coverage works. Here are five things you should know:

1. People usually underestimate the risk
90% of all natural disasters involve flooding, according to the National Flood Insurance Program (NFIP). To further underscore the danger, the NFIP notes that homes have a 26 % chance of flooding during the life of a typical 30-year mortgage. That compares to the nine percent risk your home will suffer fire damage.

Also, keep in mind that if you live in flood-prone areas, your homeowners policy doesn't protect you for flood damage. You'll need separate insurance for that.
 
2. The 30-day clause
You can't just go out and buy flood insurance after learning that a hurricane or tropical storm is approaching. Coverage becomes effective 30 days after purchase.

3. Wind damage and insurance
Insurance for windstorm damage caused by hurricanes usually comes with a deductible tied to your home's value. That deductible typically ranges from 1 to 5 %.

In some coastal areas, with high wind risk, hurricane deductibles may be higher and even approach 10 percent.

4. Premiums for flood insurance
The average premium for flood insurance in 2010 was about $600 a year. But it can climb dramatically in a high-risk area.

Flood insurance in low- to moderate-risk areas is much less, as low as $129 a year in some cases.

5. Limits of federal flood protection insurance
Flood insurance provided by the NFIP tops out at $250,000, so you may have to buy more flood coverage with a private insurer.

These policies can add as much as several million dollars of extra coverage to your NFIP base, but can only be purchased after first securing the NFIP protection.

The Street

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