3 Questions to Help You Shop for Flood Insurance

November 06, 2020 by Dan Green

Each flood insurance policy is unique. Pricing is based on the size of your home and its location; and, how much damage against which you want to protect.

In cities unlikely to flood, flood insurance can average below two hundred dollars per year for homeowners; and, $50 or less per year for renters. In higher-risk areas, insurance costs more.

It’s smart to shop around when you’re looking for flood insurance. You might find the cheapest flood insurance with small insurance companies that specialize in protecting against floods.

Here are three questions to help you get the most affordable flood insurance you can.

1. If a flood strikes your home, how much damage could you repair using your personal bank account?

When floods hit, they can be costly. One inch of flood water is capable of causing $20,000 of damage in a typical-sized home.

Someone making an insurance claim after a flood, though, doesn’t get all the money that’s requested from the insurer. Instead, they receive the money requested, minus the size of their deductible.

A deductible is the cash amount an insurance company won’t pay when responding to an insurance claim. Deductibles become the insured person’s out-of-pocket expense when something goes wrong.

When you sign up for flood insurance, you can choose the size of your deductible. $500 is the smallest-sized deductible available, and deductibles can range up to five thousand dollars.

The larger your flood insurance deductible, the less you’ll pay for flood insurance.

If you have at least $5,000 in your emergency fund, consider taking a large deductible on your flood insurance coverage.

Otherwise, opt for a smaller deductible. You’ll pay more for flood insurance when your deductible is low, but you’ll still get cash when flood waters affect your life.

2. Would you risk NOT having flood insurance?

All 50 states have experienced floods in recent years and homes in low-risk areas are still 25 times more likely to be flooded than to have a residential fire.

However, flood insurance is optional for many people. Not everyone needs to buy it.

Choosing to not buy flood insurance is a risk. When a flood hits, the damage can be huge. Walls can collapse, foundations can crack, and homes can become unsafe for living. Appliances can break and personal possessions can be ruined.

None of this damage is covered by homeowners insurance or renters insurance. The cost of repairs will have to come from your bank account. And, meanwhile, while you pay for your repairs, you’re responsible for paying your mortgage payment, too.

A flood can bankrupt you. Even though it’s not always required, getting flood insurance can be smart, defensive move.

3. Would you move all of your insurance policies to one company in order to get a big discount?

When you’re shopping for flood insurance, you might be able to get discounts on your other insurance coverages, too.

This is because insurance companies reduce rates for their customers who have two or more active insurance policies. It’s a pricing policy known as bundling.

When you bundle insurance, you can use your existing homeowners insurance policy or renters insurance policy to earn a discount on your flood insurance. Your discount could be even larger if your auto insurance was with the same company, too.

Bundling insurance can get you discounts of 25 percent or more, but you’ll want to check with multiple insurance companies in order to find your cheapest deal. Different companies offer different-sized discounts for bundling.

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