5 reasons you might need flood insurance

Flood insurance protects you from the impact of potential flooding of your home.

Weather is an unpredictable force of nature. Flooding can occur in areas that aren’t necessarily near a body of water.

Five reasons flood insurance may be a smart investment
  1. The consequences of not having flood coverage can be very expensive and your homeowners insurance may not cover flooding.
  2. Required by lender if in a FEMA flood zone.
  3. The area you live in recently flooded even though you aren’t in a designated flood zone.
  4. Floods are the most common natural disaster.
  5. Not all floods are national disasters but all floods incur costs to clean up.

When buying a new home, no one wants to find out that they are in a flood zone. However, protecting against a loss from unexpected water damage is both practical and necessary, especially if there is a mortgage on the home or if the home is on or near the water. Flood insurance protects against physical damage to property and possessions. A regular homeowner’s policy usually doesn’t cover loss due to flooding.

Property in the United States is categorized by FEMA, the Federal Emergency Management Agency, as either being in a flood zone or not being in a flood zone. If your property is designated as being in a flood zone, then the property owner will be required to purchase flood insurance in addition to regular homeowners insurance. This came about in the mid-1970’s when the federal government established the National Flood Insurance Program to provide low cost insurance to property owners located in a designated flood zone.

In August, 2014 torrential rains fell on metro Detroit. There was flooding throughout the area and homes that had previously never flooded were suddenly under water. Many homeowners suffered losses even though they had never experienced flooding ever before. This isn’t an isolated incident, either. It’s important to think about where your home is located. Is it on a rise or hill or does it lie in a low area? Are you covered in the event of flooding?

In the United States, floods are the most common natural disasters. Even if the flooding isn’t part of a national disaster, any water damage due to flooding costs money to clean up. It can be as simple as cleaning supplies but could be more extensive and include lost or ruined valuables, furniture and flooring. Having flood insurance can help to offset those costs. The average cost of a flood clean-up is $46,000. Without flood insurance, that would mean a major loss and out of pocket costs.

Protecting your property with insurance is an important art of being a homeowner. For most people, it’s the biggest investment they’ll ever make and making sure that your home is covered for both normal losses as well as flood induced losses makes sound financial sense.

Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, visit the events page or www.mimoneyhealth.org. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health.

MSU Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at MIMoneyHealth.org.

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