In today's episode, we're looking to reach out to investors out there. Maybe you're looking to buy a rental home and answer could flood insurance policies be a waste of money? We get several questions on rental properties, drainage issues, and things like that which we want to address in today's video.
First, let's go through basic flood insurance policy information. It's important to remember that just like any insurance policy, there will be a certain cost of flood insurance in order for it to take effect on a property. Now, this amount may vary depending on what type of building you're looking to get flood coverage on. A key difference between flood insurance from other insurance is that what insurance companies you're planning to get the policy from, you're going to submit the insurance payment upfront when it comes to flood policies.
Flood insurance coverage can be provided to both the structure of the building itself as well as the contents or the personal items inside the property. Now, depending on where you're getting your policy from, these coverages may vary between the Federal Emergency Management Agency (FEMA) and a Private Insurance Company.
Now, most of the time, getting flood insurance for this type of property can be a waste of money and it's important to note that the only time flood claims would payout are through what we call the "number two" rule. This is because it doesn't matter if it's two acres or two houses, as long as there are two parcels of land impacted by flooding, that's the only time the flood insurance policy kicks in. We've been getting a lot of investors asking about drainage issues and water coming in, but it's only their property being impacted.
Generally, we discourage investors from filing a flood claim for such events because of three reasons. First, as aforementioned, flood insurance may not kick in if only one property had been damaged. This means that regardless of private flood insurance or federal flood insurance, most likely that the damage on the property won't be considered to approve the flood claim. If we're talking about water coming in, but you're property's affected, it's best to check with your homeowners insurance policy to see if it's covered since most often than not, this won't be covered by your flood policy.
Now, the next issue you might encounter if you were to be approved of the insurance claim is that you may be marked as "claim happy". Claim happy are policyholders who consistently ask for insurance claims for very small damage to the property.
The last thing concerns the property itself which may put it in a severe repetitive loss property which is when a property's had more than one flood claim, disaster assistance, or any type of federal assistance in the last ten years. When it comes to severe repetitive loss properties, flood insurance premiums here can be very expensive through the National Flood Insurance Program (NFIP) even if you're not in a high-risk area. This can also be very bad when it comes to private insurance since it's most likely that they won't write a policy for these properties due to the risks they have.
If you have questions on when flood insurance policies payout, what the best flood insurance option is for you, additional coverage on flood policies, and other things about flood, reach out to us. Remember, we have an educational background in flood mitigation and we want to help you reduce risks on the value of your property long term. Click the links below to know more:
