• About
  • Mortgage Basics
  • $40K Challenge
  • Aunt Doris
  • Grandfather Says
  • Privacy
  • Archives

Len Penzo dot Com

The offbeat personal finance blog for responsible people.

Don’t Go Chasing Waterfalls: Is Flood Insurance Worth It?

By Tex Freitag

flooded house with rescue boatThe entire cost of natural disasters in the US in 2019 was estimated at over $40 billion. Floods are one of the biggest contributors to this — especially in areas prone to flooding. If you live in such an area, flood insurance is certainly something you should consider getting.

While many feel that it is a prohibitive and unnecessary expense, it seems far more reasonable once you look at the price breakdown in greater detail.

With that in mind, here is a quick primer on flood insurance cost, how coverage cost is calculated, and how to know how much insurance at-risk homeowners need to buy:

Do I Have to Get Flood Insurance?

In certain circumstances, flood insurance might be a necessary element of your mortgage contract.

Since the Flood Disaster Protection Act 1973, the federal government has made it mandatory for certain properties to have flood insurance. Specifically, these are properties in a high-risk flood area purchased with a mortgage backed by federal government funds.

This insurance must generally be retained for the duration of the mortgage.

If you do not live in such an area, or your mortgage is not government-backed, flood insurance is not legally mandatory. However, your lender may still insist on it as a condition of the mortgage.

How Is Flood Insurance Cost Calculated?

Like any other type of insurance, flood insurance costs a lot more for some people than others. Flood insurance specialists calculate your premium by reference to a number of factors.

So, how much is flood insurance? The answer for you will depend on the following.

Flood Risk

The closer you are to a high-risk flooding area, the higher your premium will be. To get a better idea of exactly how close you are to such an area, use a flood map.

Construction Methods

The way your house is built has a huge bearing on your premium. Some houses are far more susceptible to flood damage than others.

For example, a house made of wood is far more likely to suffer serious structural damage from flooding than one made of concrete.

Another consideration is the height of your home above ground level. If your house is on a hill it’s less likely to suffer flood damage, and your premium will therefore be lower.

Contents

The contents of your home are usually insured alongside the structure itself. Therefore, the greater the collective value of the goods and fixtures in your house, the higher your flood insurance premium.

Special consideration should be given to valuable goods on the ground floor of the house, such as televisions and white goods.

Getting the Coverage You Need

Flood insurance cost can be a little uninviting, especially if you’ve been affected by the COVID-19 pandemic. However, it truly is one of the best investments you can make. After all, if a flood does come and you’re not insured, you could be facing destitution. The bottom line is flood insurance will give you the peace of mind you need to go on living happily in your new home — even if you never need it.

Photo Credit: .waldec

May 21, 2020

Comments

  1. 1

    Jim says

    My wife and I bought a lakeside camp in Maine. The bank required flood insurance as a part of the mortgage as your article describes. The risk of flooding in this location is not zero but it’s quite low. Every year I cringed with the $5000 policy and reasoned that I was paying for beachfront homes in hurricane zones. As a result, I managed my finances to pay off the mortgage last month. The policy comes due in June. It will give me great pleasure to hold on to $5000 every year.

The Question of the Week:

Are cryptocurrencies a legitimate wealth preservation asset?

View Results

Loading ... Loading ...

Recent Posts

  • Black Coffee: Digital Castles in the Air
  • How to Improve Your Sports Betting Success
  • Toyota Has Started Accepting Bitcoin for Payment
  • 100 Words On: Why You Need Emergency Savings AND a Rainy Day Fund
  • Why You Should Consider a 203k Mortgage When Buying a Fixer-Upper
  • 6 Ways to Avoid Becoming a Pickpocket Victim
  • What Beginners Should Think of Before Starting Forex Trading
  • The Embarrassing Anatomy of a Phishing Scam
  • Black Coffee: Too Little Too Late
  • Dealing With a Deceased Person’s Money and Property

Disclaimer

This site is for informational and entertainment purposes only, and the content herein should not be mistaken for professional financial advice. In fact, making investment decisions based on information published here, or any other website for that matter, is more than unwise; it is folly. This website accepts advertising in the form of monetary and other compensation; as such, topics of discussion are occasionally influenced by these advertisers. Sometimes, an article may also include affiliate links, meaning, at no additional cost to you, this blog earns a commission if you click through and make a purchase (for example, as an Amazon Associate I earn from qualifying purchases). Remember, you and you alone are responsible for the decisions you make in life, so please contact an independent financial professional for advice regarding your unique personal situation.

Sign up for the weekly Len Penzo dot Com newsletter
Len Penzo dot Com Delivered Weekly
Join more than 40,000 readers and fans who enjoy personal finance and macroeconomics with an offbeat twist!
Invalid email address
Thanks for subscribing!

Popular Now:

  1. 1. The 6 Most Valuable Grocery Store Products
  2. 2. Series I Savings Bonds Are Now Paying 9.62%; Here Are Their Pros & Cons
  3. 3. 25 Examples of Shrinkflation That No Longer Fool Consumers
  4. 4. 7 Big Reasons Why a Roth IRA Isn’t the Best Way to Save for Retirement
  5. 5. 3 Ways That Great Sleep Helps You Get Richer
  6. 6. What’s the Fastest Way to Pay Down Your Mortgage Early?
  7. 7. How to Save Money on Dental Care So You Won’t Go Broke at the Dentist
  8. 8. Historical Gold & Silver Benchmarks for Wages and Commodity Prices
  9. 9. Tip Inflation: We’ve Got Nobody to Blame But Ourselves
  10. 10. 4 Good Reasons Why Some Quarters Are Painted Red

All-Time Most Popular:

  1. 1. 19 Things Your Suburban Millionaire Neighbor Won’t Tell You
  2. 2. Dear Friend: Here Are 41 Reasons Why I’m NOT Lending You the Money
  3. 3. Why Your Expensive Luxury Car Doesn’t Impress Smart People
  4. 4. If You Can’t Live on $40,000 Annually It’s Your Own Fault
  5. 5. 21 Reasons Why Corner Lots Are for Suckers
  6. 6. 4 Smart Reasons Why College Isn’t for Everyone
  7. 7. 18 Fast Facts About Social Security Numbers
  8. 8. My Ketchup Taste Test: Upset! Guess Which Brand Topped Heinz
  9. 9. Why I Prefer a Spreadsheet to Track Expenses and Manage My Finances
  10. 10. Here’s a Simple Trick for Getting Credit Card Interest Charges Waived

Copyright © 2022 Len Penzo dot Com · All Rights Reserved · Designed by Nuts and Bolts Media

© Len Penzo dot Com 2008–2022