Flood Insurance for Your Second Home by the Water
Owning a second home is one of the most exciting things anyone can do. Having your own place to escape, whether close to home or not, literally is “a home away from home” in the most relaxing sense of the phrase. You get to experience the sense of being away, but you also get to keep your casual, comfortable feel that is sometimes difficult to achieve when renting or staying at a friends. What better place to call your second home than an area by the water? Lakes, the ocean, and even ponds make for exciting adventures, great views, and the best summers.
When it comes to insurance, make sure you have the right policy for your second home. It is important you have the coverage you need year round, even if you are not living there all year. One important factor to keep in mind, once you have gotten the proper home insurance coverage, is if you will need flood insurance coverage for your new home. If you have chosen a location by water, this should be one of your first thoughts. While there is nothing better than a home right on the water, it does come with risk and it’s important you protect your home and belongings from that risk.
The first thing you need to do when it comes to flood insurance is to figure out your zone. If you are in a high risk zone, you will have been required by your mortgage company to obtain flood insurance when you bought it. If you aren’t, the coverage is an option for you. Depending on your zone, you will also have various coverage options. Your mortgage company will only require you to get the building coverage you need to pay them back. Chances are you are going to also want coverage for your contents and potentially excess coverage as well.
Let us take a closer look at your options when it comes to the following coverages:
- Building Coverage
- Contents Coverage
- Basement Coverage
- Excess Coverage
Coverage for Your Building
As mentioned above, homes in high-risk zones will be required to have flood insurance by their mortgage company. A standard flood insurance policy (policy for those in high risk zones only) can offer up to $250,000 in building coverage for your home. Your mortgage company will not require you to have enough to replace your home; they will only require you to have enough to pay off your mortgage. Flood insurance, especially for those in high-risk areas is designed to help you recover from a disaster; it’s smart to get enough coverage to do just that, not just pay off your mortgage. Worried that you need more than $250,000 worth of coverage for your second home? Take a look at the Excess Coverage section below to find out more about the option to add more coverage.
Homes in low to moderate risk zones leave the decision to the homeowner on if they need coverage and how much they need. Given the increasingly unpredictable weather and how it tends to lend itself to coastal areas, this is something you definitely want to consider. Flooding can happen due to excessive rain and melting snow, which can happen even for people not on the coast. Another thing to consider is if you are right on the line of a flood zone, those zones are constantly being updated. Obtaining flood insurance before it is required could make you eligible for the grandfathering rule currently in place, leaving you with a lower premium if your zone is changed to high risk.
Coverage for your Contents
Contents coverage is optional, but given the fact that the items inside your home are at just as much risk as your home itself, it is a no brainer to also purchase contents coverage for your home. Whether you are in a low risk or high risk zone, you can obtain up to $100,000 worth of contents coverage. There are lower options if that amount seems high for you and your items.
When determining how much contents coverage you need for your home, one of the best things you can do is take a home inventory. Taking an inventory of the items in your home gives you the most accurate estimate of the value of the items in your home. Given this is your second home, you may find yourself needing less coverage than you do for your first home. On the other hand, if you still have a TV and other electronics, the cost of those alone can add up. You will also want to have a good idea of any items in your home that are very valuable, such as jewelry, art work, etc. These items may require a special coverage.
Coverage for your Basement
When it comes to coverage for your basement, there are a lot of restrictions. Limitations apply for anything that is considered a sunken room or sunken portion of a room, having its floor below ground level (on all sides) or when a building is constructed with what is sometimes called a walkout. When a building is elevated on foundation walls, coverage limitations apply to the crawl space below as well. Ask an agent about the specifics for what is and isn’t covered in your finished or unfinished basement. There is limited coverage regardless of zone or the date of construction.
Some examples of items covered under building coverage (as long as they are connected to a power source or installed in their functioning location) are sump pumps, oil tanks and the oil in them, natural gas tanks and the gas in them, furnaces, and hot water heaters. Aside from those items, there is also coverage for foundation elements, stairways, elevators, and unpainted drywall and ceilings. Under contents coverage, some of the things covered in a basement would be clothes washers and dryers, food freezers, and the food in them.
Flood insurance doesn’t cover basement improvements or items not necessary in making the home “safe, sanitary and functional”. This would mean things such as carpeting, finished walls, ceilings, furniture or personal belongings that may be kept in the basement. All of this is something to keep in mind for homeowners with finished basements that have a lot of those things currently in that space.
As mentioned above, the most coverage you can purchase for the structure of your home with the NFIP is $250,000. For many people, that coverage would not be enough in the event of a flood. Coastal homes tend to have higher value and you want to be sure that if something happens to your home, you have enough. Getting excess coverage can help you do just that.
With Excess Flood Insurance coverage you have the ability to make sure you are truly covered. In some cases, $250,000 may not even be enough to cover repairs. Working with a knowledgeable agent is truly the best way to insure the right coverage for your home. Once you have an estimated value of your home, talk with an agent about your options and be sure to look into Excess Flood Insurance if that number is above $250,000. Don’t just have enough coverage to satisfy your mortgage company.
Too many homeowners do not realize they do not have coverage for flood damage until it is too late, don’t be one of them. Be proactive about protecting your home. If you are not sure if you need coverage, how much you need, or even how to go about getting flood insurance coverage, give our agents a call and let them walk you through the process. If you are in a high risk flood zone, they can make the process a little less stressful for you with their guidance and if you are in a low to moderate risk flood zone, they may surprise you with how affordable coverage can be!Read More