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The importance of flood insurance

June 25, 2014

While homeowners in desert areas or dry climate regions across the country are much less likely to consider taking out a flood insurance plan, there are plenty of reasons for Americans living near a body of water to consider such a policy.

According to Mark Koulda of the Insurance Federation of Minnesota, even if a person doesn't live near a flood plain, it might be a good idea to talk with an insurer about the nuisances of coverage. Kulda pointed to Minnesota as a reason why more people need to consider flood insurance. The state has been hit hard by recent flooding, but only 12,000 homeowners have flood insurance out of one million homes in the Land of 10,000 Lakes.

Homeowners should consider taking out a flood insurance policy.

“That's one of the biggest misconceptions and drives all of us in the insurance industry crazy,” Kulda told CBS affiliate WCCO.

He noted that all flood insurance in the state is purchased through Federal Emergency Management Association (FEMA), with the only requirement to purchase a plan is if a person's city participates in the National Flood Insurance Program. Approximately 85 percent of the municipalities in Minnesota have registered for the program.

“You just have to pay the premium, sign up for the coverage and you can be covered in 30 days,” said Kulda, who added that homeowners with pooling water near or around their home should consider taking out a flood insurance plan. Kulda said he's seen food policies go for as little as $350 but as high as $2,000 to $3,000 for a maximum policy in places that are at a high risk for flooding.

Kulda told WCCO that Americans can purchase a special endorsement through their homeowners policy that covers a home against sewer and sump pump problems, although flood insurance is separate.

Homeowners or prospective homebuyers considering all of their insurance options should contact SelectQuote Auto & Home. SelectQuote deals with some of the nation's highest-rated insurers and comparison shops to offer consumers the best rates and policies around.

Contemplating flood insurance

A typical homeowners insurance plan will cover a property against a broken water pipe that causes internal flooding, heavy rain that seeps through the roof or damage caused by a hailstorm. It should also be noted that losses from theft, fire or explosion resulting from water damage is usually covered by a typical insurance policy.

But where homeowners insurance ends is if a nearby river or body of water were to overflow and wash into a person's home, or if heavy rain causes excess water to seep into a home. That's where flood insurance must come in to play if a person requires such protection.

Facts about flooding

A flood can strike an untouched area quicker that most people realize. According to the National Flood Insurance Program, nearly 20 percent of flood insurance claims come from homes outside of high-risk areas. For example, homes in Maryland have recently been hampered by flooding. Many of those homes don't have flood insurance, according to Therese Goldsmith, commissioner of Maryland Insurance.

“Only 74,068 of Maryland's 2.4 million households have flood insurance, leaving a large portion of our population unprotected from the potentially high cost of major repairs,” Goldsmith said. “Everyone should evaluate the risks and consider whether to purchase coverage through the NFIP.”

But don't think that Maryland and Minnesota are the only states at risk. FloodSmart.gov reported that all 50 states have experienced floods or flash floods in the past five years.