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Flood Insurance

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Let’s talk about homes that require flood insurance.  They aren’t very common in Colorado, but I’ve dealt with them, and they can bite you if you’re not careful.

What’s the big deal? 

The biggest issue homeowners face is the cost.  At 4% interest, a mortgage costs you $4.77 per month per $1000 borrowed.  If you are considering buying a $250,000 home that requires a monthly flood insurance premium of $250, then you are paying the same amount monthly that you would for a $302,000 home that doesn’t require flood insurance… yikes!  So homes that require flood insurance may not sell for as much because extra money will be needed to pay for that insurance every month, money that can’t go towards paying the mortgage.  And as the great flood of 2013 showed, 100 year floods do happen!

Get Your Flood Map

So how do you know if your current home or the home you are thinking of buying is in a flood zone?  The Federal Emergency Management Agency (FEMA) determines flood zones, and they have a decent online mapping service where you can search any address here: https://msc.fema.gov/portal.  You enter the address on the first page and then the site is a little confusing as the first map just lets you select an area, you then have to hit the “Map Image -> View/Print” button to get the actual flood map.  These maps are great to know which areas to avoid.  Mortgage companies will also pull up flood certificates to determine if a property will require flood insurance as part of the loan approval process.

Ok, So I Need Insurance, How Do I Get It?

Flood insurance isn’t like other types of insurance, there aren’t competing companies that provide it.  Flood insurance is a federal program but it does have to be purchased through insurance agents, it can’t be purchased directly from the national program.  Some insurance agents may be able to give you a better deal if you bundle policies, but that’s up to them as the actual rates don’t vary.  Also, coverage doesn’t vary based on the size of the home, each home is only covered up to $250,000 so more expensive homes may require supplemental policies.  Those policies may vary in cost so you may be able to compare policies there.  Check with your insurer as to what they are covering, most of the time personal property in basements aren’t covered, and there are limits on what personal property is covered in the rest of the home.
Just because a home needs flood insurance doesn’t mean it’s not a great home, it just needs a little extra attention.  It’s impossible to know what Mother Nature will bring our way, no one who lives in this dry state thought the massive flooding we saw a few years ago could happen here, but it did.  It’s important to know the past history of a property before you buy it, that’s why I get CLUE reports on all properties my buyers get under contract.  These reports indicate whether a property has had any insurance claims within the past 5 years, multiple claims may mean insurance companies won’t take the risk or may charge more for coverage.  You need to know this upfront before your money, and your heart, are invested!