Many people do not consider flood insurance as an important investment. It is right and wrong based on many factors. Unlike the car insurance or the life insurance, the flood insurance does not benefit all types of people. The average flood insurance premium is $650 per year, but the opportunity cost of not using it would be thousands of dollars.
Who needs it?
If you are living in a low risk area, then the cost of the coverage would be lower. However, if you compare the amount of money you would be paying as premium and the amount of money you would need in case of any problems or damages caused by flood, you would come to know that the premium is much lower. If you are in a risk free area, very far away from the coastal region, the cost of the premium would be higher than the probability of flood damage and it is better to drop the insurance. However, it is smart to have a little amount of money saved for unexpected repairs.
People in high risk locations would be burdened with $27 thousand for each foot of water in a 1000 sq. ft house. The average claim is a little more than $38 thousand. Thus, compare the estimate of average flood damage and the claim to know whether you require the insurance or not.
How to save on the premium?
If you decide that the flood insurance is something that you would need, you need to take up a few steps to reduce the premium. Home improvement like increasing the elevation of the house, installing flood vents and other changes which would decrease the damage of the flood would decrease your premium.
In 2012, more than 3.4 billion dollars were claimed in insured losses, due to the flood damage in New York. Determining whether you need the flood insurance or not, is a very complicated problem. There are high chances that you might not be using the insurance at all and end up paying all the premiums, for nothing. Predicting the natural disaster is not a possible task and thus, there are chances for mistakes in this decision. Thus, in case of low risk area, it is better to save a considerable amount of money for the sake of repairs and temporary lodging, in case of any mishap. Taking insurance after the mishap, would not help you to take care of the cost of damages and other needs. Learn more about the insurance, the premium, and cost of damages which are likely to happen and compare it with the premium cost.