Natural disasters like earth quakes, storms and landslides keep occurring in different parts of the world causing great losses both in terms of human life and property. Sometimes hazards like floods do not cause personal injuries or death, but cause huge financial loss due to damage to residential and commercial property. Though steps can be taken by communities to reduce the risk of floods, people especially those living in flood prone areas should also take necessary precautions to protect themselves from loss of property. The best way to do this would be to buy a flood insurance policy.
People generally insure their homes by buying homeowner’s insurance policies. Since this insurance protects them from different kinds of losses caused to the house, many are under the false impression that they are protected from flood losses too. It is only after their home is damaged in a flood and the insurance company rejects their claim, they realize that they should have taken a separate flood insurance policy.
People who buy a flood insurance policy with ‘building only’ coverage would be compensated for any damage to the structure of the building due to a flood. Certain permanent fixtures to the building like the electric and plumbing system, central air conditioning and heating are also covered.
A person may wish to protect himself against losses caused to the contents of his house in case of flooding. He can buy an insurance policy with ‘contents only’ coverage. Items like jewelry and money however would not be covered.
Insurance policy rates depend on whether the property is located in a high risk zone or low to moderate risk zone.
The business of insurance becomes profitable only when a large number of people buy insurance policies and the number and amount of claims are few. In case of flood insurance, it is mostly people who live in flood prone areas who buy a flood insurance policy. This is called ‘adverse selection’. The number of claims is naturally large. Insurance companies have to pay large amounts of money to settle claims. They would suffer losses if they charged low premiums. Hence private insurers have no option but to keep the premium rates high.
A person buying a flood insurance policy has to do a lot of research to find out the rates and terms of different insurers. Though an insurance agent can supply this information, people find it very convenient to gather information as well as purchase the flood insurance policy online. There are insurance websites with various features like online insurance premium calculators. When the person enters the required details, he would get information on the rates of different insurers. He could compare them and buy the policy which offers the best terms.
Taking a flood insurance policy would be very beneficial to people living in flood prone areas as they would not suffer financially in case of property damage.