The National Flood Insurance Program issued the FAQ below about flood insurance myths. If it’s something you’ve wondered about, this should answer many questions.
One thing it does address is the recent retooling of the National Flood Insurance Program. Following the passage of the Flood Insurance Reform Act of 2012, the National Flood Insurance Program will lose many subsidies that kept rates low.
Rates will also rise for areas more frequently hit by storms and flooding. The artificially low rates in these areas will be adjusted to reflect actual risk.
Implementation of the increases are being staggered throughout 2013. The additional costs to policyholders could be in the thousands.
Is flood insurance still a viable option? In an interview that will appear in a future edition of Living Ready magazine, disaster planning expert Paul Purcell said the decision must be made on a personal, case-by-case basis. There isn’t a set “yes” or “no” answer.
Hopefully, the following FAQ from the National Flood Insurance Program will help homeowners make a decision.
Why You Shouldn’t Count on Flood Disaster Assistance
Before most forms of federal disaster assistance can be offered, the President must declare a major disaster.
The most common form of federal disaster assistance is a loan, which must be paid back with interest.
The average Individuals and Households Program award for Presidential disaster declarations related to flooding in 2008 was less than $4,000.
To qualify for federal home repair assistance, your home must have relatively minor damage that can be repaired quickly.
You do not qualify for federal rental assistance unless your home has been heavily damaged or destroyed.
The Costs of Having Flood Insurance vs. Not
The duration of a Small Business Administration (SBA) disaster home loan can extend to 30 years.
The monthly payment on a $50,000 disaster home loan at 4 percent interest is $303 for
The average premium for federally backed flood insurance through the National Flood Insurance Program (NFIP) is $550 a year.
The cost of a Preferred Risk Policy starts as low as $119 a year.
What are the Odds of Needing to Use Flood Insurance?
Floods are the most common, and most costly, natural disaster.
In the past several years, about 60 percent of all declared disasters involved flooding.
Because more roads, buildings, and parking lots are being constructed where forests and meadows once stood, floods are becoming more severe throughout the U.S.
In areas with the greatest risk of flooding, Special Flood Hazard Areas (SFHAs), a building has a 26 percent chance of being flooded during a 30-year mortgage.
On average, 25 to 30 percent of all flood insurance claims paid by the NFIP are for property outside of SFHAs.