Flood Insurance Essay

Flood insurance can be a very important insurance to have even if a person does not think they are located in a flood zone. Multiple factors can cause a flood to happen even if a person is not considered to be in a flood plain, such as massive storms. Hurricanes can cause a large spike in the insurance claims paid in a year. The two largest spikes in the past 10 years according to FEMA were in 2005, when Hurricane Katrina hit the U.S., and in 2012 when Hurricane Sandy hit. The number of losses paid in 2005 was 213,515 and for 2012 149,808, according to FEMA. As you will see, there are multiple benefits to obtaining flood insurance, the estimated costs of coverage, and who should obtain the insurance.

Flood insurance protects homeowners, renters and business owners in the event their home/business sustains damage due to an increase in water levels. Even though a home or business may not be located on the typical flood plain, floods can happen as a result of clogged or outdated drainage systems, heavy rainfall, hurricanes and overtopped levees (FloodSmart.gov, 2015). If a home or business is located in an area that is considered a high-risk for flooding, which is defined as a 1 in 4 chance the home or business will flood at least once during a 30 year loan period, the home/business owner is required to obtain flood insurance (FloodSmart.gov, 2015). In moderate to low risk areas, flood insurance is not required but is recommended (FloodSmart.gov, 2015). Even if a person has homeowners insurance, flood insurance is typically not included in their policy, so they would need to purchase a separate policy (Minnesota DNR, 2014).

The majority of people who rent or own a home/business should consider purchasing flood insurance to cover the damage a flood can cause. According to FloodSmart.gov, the average flood claim amounted to more than $38,000 for residential properties and more than $89,000 for businesses. Flood insurance covers buildings and the foundations, electrical and plumbing systems, appliances, permanently installed flooring, window blinds, detached garages, personal items, portable appliances, food freezers and the food contained in them and certain valuable items such as artwork or expensive coats, etc. (FloodSmart.gov,