Why is flood insurance important?

Homeowner’s insurance policies do not cover flooding, so you may be required to purchase flood insurance separately.  If your home is in a designated Special Flood Hazard Area (high risk), the mortgage lender must, by law, require you to buy flood insurance as a condition for receiving a Federally backed loan.

But, even if you are not required by law to buy flood insurance, you should consider it because you do not need to live near water to be flooded.  In Hawaii, floods are caused by storms, hurricanes, and water backup due to inadequate or overloaded drainage systems, dam or levee failure, new construction, etc.

It is not just high-risk areas that are flooded.  Nearly 25 percent of all flood insurance claims come from medium- or low-risk flood areas.

Relying on Federal disaster assistance is not the answer.  Federal disaster assistance is available only if the President declares a disaster.  Even then, disaster assistance is often a loan that must be repaid, with interest, in addition to mortgages, other loans, and credit card debts.  Flood insurance pays even if a disaster is not declared.

Who can purchase flood insurance?

Anyone in a community that participates in the National Flood Insurance Program can purchase building and/or contents coverage, with a few exceptions.  Coastal Barrier Resources System (CBRS) areas, Otherwise Protected Areas (OPAs) and buildings principally below ground or entirely over water are not eligible for National Flood Insurance.

How do you obtain a flood insurance policy?

You can purchase National Flood Insurance from private insurance companies and agents.  Currently, there are over 100 insurance companies that sell National Flood Insurance coverage, in addition to some 60,000 independent insurance agents.

If the seller of the property has flood insurance coverage on the building, it’s possible that policy can be assigned to the buyer at the time of closing.

If the mortgage company requires flood insurance as a condition of the loan, the lender may escrow flood insurance premiums.

For more information about the National Flood Insurance Program and flood insurance, visit FloodSmat.gov  or contact your insurance company or agent.

Read Part 2

Disclaimer:  The discussion above is based on FEMA’s publication titled Questions & Answers About Flood Insurance for Real Estate Professionals.

Contributed by Michael Zimmerman
Direct:  808-457-9683
Michael@Michael-Zimmerman.com
www.Michael-Zimmerman.com
Subscribe to Honolulu Real Estate and Community News

You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.