Is Flood Insurance Necessary Outside of a Flood Zone? Experts Say Yes

It is a common belief that you only need flood insurance if you live in a flood zone, and if you live outside of a flood zone you do not. However, that’s not exactly accurate. Most of the United States is mapped into flood zones as part of the National Flood Insurance Program (NFIP). The intent was to provide insurance to people who could not get flood insurance from private insurance companies. The Federal Emergency Management Agency (FEMA) created a map of the most flood-prone areas in the country and the NFIP began working with those flood prone communities to help better prepare them for flooding. Essentially, it would help manage flood risk in these vulnerable areas and reduce the cost of flood-related damages in the country. However…

Floods Can Occur in Any Zone

FEMA’s flood zone map classifies different areas according to their varying levels of flood risk. In high-risk zones such as A or V, purchasing flood insurance is typically required by most lenders. For those in low-risk areas, the option of carrying flood insurance is up to the discretion of the homeowner or property owner. However, flooding is one of the country’s top natural hazard risks, and can affect homes and businesses that are nowhere near any bodies of water.

Using Hurricane Harvey as an example, based on FEMA’s flood zone designations, approximately 80 percent of Harvey victims were not located in a flood zone and thus did not carry flood insurance. Hurricane Harvey caused massive flooding that displaced over 30,000 people and damaged or destroyed over 200,000 homes and businesses, with damage estimates exceeding $125 billion.

Hurricanes aren’t the only the only cause of flooding outside of flood zones. Excessive rain, melting snow and dam or levee malfunctions can cause severe flood damage in areas that are supposed to be at a low risk for flooding. With the changing nature of weather patterns, it’s difficult to predict where the next major flood event will occur.

Who Really Pays for Flood Damage?

When a major flooding event damages a community that is supposed to be at a low risk for flooding, the government is supposed to provide financial assistance to those affected. However, most consumers don’t realize that the government aid is provided via long-term loans, with qualification requirements, and of course must be paid back. For those in lower-risk areas, flood insurance can be an affordable insurance option, with financial benefits that do not need to be repaid later on down the road.

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