Natural disasters like earthquakes, landslides, hurricanes and floods cause a lot of loss to life and property. Some areas are vulnerable to flooding with floods occurring time and again. Though lives can be saved by timely warnings, the chances of damage to property are high. It would be advisable for house owners especially those living in flood prone regions to take flood insurance after studying flood insurance quotes of different companies.
Type of coverage
A person who wishes to take flood insurance may want to be indemnified for loss caused to the structure of the house in which case he should take ‘building only’ cover. If he wants to be insured only for the loss caused to the contents of the house then he needs to take a ‘contents only’ cover. He can also opt for a combined coverage where both the house and its contents are insured. The kind of coverage selected will determine the flood insurance quotes of companies.
In an insurance policy, a deductible is the amount of loss which the insured is ready to bear himself. The loss in excess of that amount up to the amount specified in the policy will be borne by the insurance company. The higher the deductible, the lower will be the premium for flood insurance.
Basis for compensation
The insurance policy would stipulate whether the ‘replacement cash value’ or the ‘actual cash value’ is to be paid in the event of loss. If the basis is ‘replacement cash value’, then the amount required to replace the damaged property will be paid. The actual amount of loss would be paid if the basis is ‘actual cash value’. The flood insurance quotes would depend on the basis for compensation.
Standard flood insurance vs. Preferred risk policies
Though flood insurance is generally taken by people who live in flood prone areas, people living in areas with low or moderate risk also take these policies. In such cases, the flood insurance quotes are low as it is rare that claims arise on such policies. They are called preferred risk policies as opposed to standard flood insurance policies purchased by people staying in ‘high risk’ zones.
Individual insurance companies
A person wishing to take flood insurance can obtain flood insurance quotes from each insurance company, compare them and select the insurer offering the best terms. However, this would be a cumbersome process.
One can get personalized service from an insurance brokerage. The broker / agent would provide all the information required including quotes and terms offered by different insurers.
There are various insurance sites which offer correct and impartial information regarding flood insurance provided by different insurers. By entering the details asked for, the person wanting to buy flood insurance can get comparative flood insurance quotes. This is the best source, as the information can be got within a very short time and without personally having to go anywhere.
Points to be noted about flood insurance
Some insurance companies give low flood insurance quotes to attract customers who would realize only later that the company has charged heavy fees. It is better to clarify with the company regarding the actual cost of taking the policy before buying it.
In flood insurance, there is the problem of ‘adverse selection’. Mostly, people who really face the risk of floods take this policy. So insurance companies receive heavy claims, sometimes even more than the amount they actually receive as premium. Insurance companies may also reject claims on flimsy pretexts.
Flood insurance is necessary for people living in areas with high chances of flooding. In fact, in some places like the U.S., it is mandatory for people living in high risk zones to take flood insurance without which they would not get a mortgage loan. Comparing flood insurance quotes and buying the right insurance policy would protect the insured from the loss of property in case of flood.