Private flood insurance can be complicated but it doesn't have to be.
The whole country is moving out of the winter season which means a lot of melting snow for most areas in the United States. This is where your sump pump can be very helpful in reducing damage to your home...
But what if this gets flooded and needs to be replaced?
In this article, we want to talk about how using flood insurance to replace a sump pump could cost you way more than a sump pump alone, how flood impacts a property, and how this impacts future premiums as well.
What Sump Pumps Are
First, we want to cover what sump pumps are for us to be able to get everyone up to speed on the things we'll cover in this article.
A sump is a low space that collects any type of water that comes from the soil. It's like when you're making coffee where the sump itself is the jar or mug and the soil around it acts like the coffee filter that allows the water to go through.
This water generally is the excess water that goes into the ground during the heavy rain — sometimes it could be due to snowmelt — so instead of it oversaturating your basement causing flooding, the sump collects all of this.
Now, what happens when there's too much water in that hole? That's where the sump pump comes in. The sump pump is a device that's connected to a lot of pipes that send all that collected water into the main water drainage in your area.
So what if there was a flood and your sump pump got damaged?
Why You Should NOT File a Flood Claim
The basic response to flood damage or flood loss is to file a flood insurance claim from your flood policy, right? It's the only thing you can do to really manage the costs of whatever repairs you'd need.
However, it's a very different story when it comes to sump pumps.
— But Chris, filing a flood claim will get me coverage for the repairs and reinstallation of a new sump pump which can protect me long-term!
That is true, but only to an extent that your property is only protected from damage, but your wallet, not so much. Think of it this way, the current costs of installing a new sump pump range from $1,000 to $2,500. This includes the device itself and the labor that goes into it.
Generally, when it comes to flood insurance, deductibles start at $1,000. So when you file a flood claim, already, you might not be breaking even with what you're getting from your flood insurance.
Once you file that flood claim for a small repair or loss and you're doing a private flood insurance policy, the insurance company might non-renew your policy over this claim. That's already bad as it is and the same goes for federal flood insurance.
Risk Rating 2.0 & Flood Claims
The National Flood Insurance Program (NFIP) has moved into what's called Risk Rating 2.0. Flood claims directly impact your premium rates here. This means that homeowners will be assessed on the overall flood risk that their property presents and, yes, this includes looking into your flood claims history.
You see, the claims variable is now a big thing with Risk Rating 2.0 since this is like a scoring system that depends on how many flood insurance claims you've made. Since these claims don't really expire and stay for the life of the property, filing a flood claim to get your sump pump fixed can hurt you more long-term.
The Risk Rating 2.0 mostly caused an increase in premium rates across all states. Even if you're just paying for a $500 premium, after you file that sump pump flood claim, you will see an increase twice, if not thrice that amount.
It may sound great to have your flood insurance cover the costs to repair your sump pump, but as a homeowner, you should look at the financial impacts this may cause you. Filing a claim for a sump pump alone can also hurt your chances of selling the home due to expensive flood insurance costs.
This is why we only recommend filing a claimif the flood damage to your property is more than $10,000. In the end, you may be able to save a few hundred bucks with this flood claim, but each year, you will be paying more for your flood insurance premium.
If you got questions on how to save flood insurance costs, when to file a flood claim, or anything related to floods and insurance, click below to go to our Flood Learning Center:
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Remember, we have an educational background in flood mitigation which lets us help you understand your flood risks, flood insurance, real estate selling and buying, and mitigating your property's value long-term.
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