Darius was happy to find out that his offer to purchase a house was accepted by the seller. Darius' mortgage lender advised Darius that he must obtain homeowner's insurance coverage by the time of settlement, as well as flood insurance. Darius doesn't think it's likely there will ever be a flood anywhere near the house. He is unsure why the lender has requested that he purchase flood insurance.

What Is Flood Insurance?

Congress created the National Flood Insurance Program (NFIP) by way of legislative enactment. Congress' purpose in creating the NFIP was to create a national program for flood management. The purpose statement set forth at the outset of the legislation, found at 42 U.S.C.S. ¤ 4001(a), states, in part:

The Congress finds that (1) from time to time flood disasters have created personal hardships and economic distress which have required unforeseen disaster relief measures and have placed an increasing burden on the Nation's resources; (2) despite the installation of preventive and protective works and the adoption of other public programs designed to reduce losses caused by flood damage, these methods have not been sufficient to protect adequately against growing exposure to future flood losses; (3) as a matter of national policy, a reasonable method of sharing the risk of flood losses is through a program of flood insurance which can complement and encourage preventive and protective measures; and (4) if such a program is initiated and carried out gradually, it can be expanded as knowledge is gained and experience is appraised, thus eventually making flood insurance coverage available on reasonable terms and conditions to persons who have need for such protection.

Do All Homeowners Need Flood Insurance?

Homeowner's insurance does not cover damage that results from flooding. A separate flood insurance policy is necessary. Moreover, just because a home is not located near a body of water does not mean that it will not be flooded. Flooding occurs as a result of melting snow, storms, overloaded drainage systems, and other causes. Every homeowner should carefully consider whether to purchase flood insurance. If a community participates in the NFIP, flood insurance is available to the homeowners in the community.

How Much Does Flood Insurance Cost?

As is the case with homeowner's insurance, flood insurance policies are issued on an annual basis. The NFIP can help you estimate your flood insurance premium online at floodsmart.gov, but you must ask a flood insurance agent to know the cost for sure. A homeowner can purchase flood insurance for a dwelling up to $250,000 and can purchase additional flood insurance for the contents of the dwelling up to $100,000. Notably, a homeowner may be entitled to a better rate on flood insurance if the risk of flooding in the homeowner's community is very low. An insurance agent can provide further details.

Flood Insurance vs. Disaster Relief

It is important to keep in mind that federal disaster relief is only available if the President of the United States declares a disaster. As to many disasters, the President never makes such a declaration. Even if the President does not declare a disaster, flood insurance provides protection to an insured homeowner.

For More Information

If you would like further information on flood insurance, you may telephone the NFIP at 1-888-379-9531.

Copyright 2010 LexisNexis, a division of Reed Elsevier Inc.