Homeowners' policies of standard nature do not provide coverage in case of flood damage to the home and personal property. But homeowners can acquire a flood insurance policy through the National Flood Insurance Program. Homeowners who are located in the standard flood areas or zones of A, AE, V, etc. are required to purchase flood insurance. The lender may not require homeowners living outside the standard flood areas to obtain flood insurance. However, it is advisable for homeowners to pick up flood insurance since it can be a sound and prudent investment in the event of flood damage. Homeowners located in low and moderate risk areas have 25 to 30% possibility of experiencing losses according to Federal Emergency Management Agency (FEMA). Homeowners residing in low to moderate risk areas can acquire flood insurance at lower rates.
Flood insurance coverage refers to the cost of replacing the home. But this covers only the actual cash value for the coverage of your possessions. The actual cash value implies the value of the possessions required to be replaced after deducting the relevant depreciation value. It is recommended that homeowners should opt for flood insurance, particularly if the home has the potential of being flooded by a lake, the ocean or sea, melting snow, a gulf, or a nearby river.