Flood Insurance for Your Home or Real Estate Investment

Flood Insurance for Your Home or Real Estate Investment
By J Harris

Given the recent hurricane and flooding disasters in the country, homeowners, real estate lenders, and insurers are giving flood insurance a lot of attention. There are some basic questions you should ask, and facts you should know about flood insurance, before making any real estate purchase. A great resource for any related questions is the government sponsored flood insurance website at www.floodsmart.gov.

First off- if you have a federally backed mortgage, you are required to have flood insurance in high-risk areas. Also, lenders may require flood insurance on real estate properties in high-risk areas. If its not required, but the responsible thing to do in your area, here are the basics.

What Do You Get From Real Estate Flood Insurance?

Basic homeowners insurance wont cover flood damage for real estate structural loss, furnaces, water heaters, air conditioning units, carpeting and flooring. Flood insurance does that. You can purchase additional flood insurance for furniture and personal items. The coverage is fairly inexpensive- visit the government website for an estimate based on your real estate holdings.

Dont think youre at risk? The NFIP (National Flood Insurance Program) reported that a third of the payments it made last year were to real estate properties in low-risk communities. In the course of a 30-year mortgage, your home has a 26% chance of being damaged by a flood (according to NFIP statistics). Your fire risk is only 9%. Having NFIP approved flood insurance guarantees your claim is backed by the government. Knowing that, what questions should you ask before making a real estate purchase?

Questions to Ask Before Buying Real Estate

In addition to the government sponsored website, your real estate agent and your insurance agent should be able to answer some basic questions regarding your chosen property.

What is the propertys flood risk?
Does the area participate in the NFIP?
Is flood insurance required on this property by the lender?
Is the property near a dam, or levee?
Does the current real estate owner have flood insurance?

You may also want to ask your insurance agent about a Community Rating System (CRS) discount on your real estate property. Find out exactly what the policy covers, and what additional coverage is available. Finally, ask about premiums for higher deductibles, and associated fees and expenses.

Congressional Issues Affecting Flood Insurance

In June the National Association of Realtors (NAR) testified before the House Subcommittee on Housing and Community Opportunity to support H.R 1682, the Flood Insurance Reform and Modernization Act of 2007. Vince Malta, vice-chair of the NARs Public Policy Coordinating Committee said, To maintain the vitality of residential and commercial real estate, certain safeguards must be made available such as the federally backed flood insurance through the NFIP.

Reforms to the NFIP are expected to be ongoing as the real estate community, insurers, and government agents come to a consensus on the best ways to protect real estate investors and homeowners.

John Harris is a researcher and writer on real estate topics such as economics, credit improvement tips, home selling advice and home buying preparations. For more information please visit Oceanside Homes for Sale

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