Flood insurance

With global warming on the rise, freak weather related phenomenon are on the rise. There have been numerous cases of flooding due to excessive rainfall in some areas while areas which usually had ample and regular monsoon are reeling under drought. A never heard of phenomenon in the form of tsunami was felt by parts of South East Asia few years ago. There was tremendous loss of life and property due to flooding of the low lying areas as well as those near the sea. What happens to the owners of these properties that have been damaged? Many people are unaware of the policy called flood insurance. Although a relatively new scheme, it has been around for a decade now. It offers protection against the loss of property caused by floods. Although these schemes are available, they have not really reached the masses. As statistics show, only a meagre twenty percent of the homes in America are insured against flooding.

Working of Flood Insurance

Flood insurance works like any other insurance scheme. There are many private companies that offer insurance against flood. While many companies may not specifically offer flood insurance in isolation; many times, it comes under normal property insurance schemes. When you take an insurance cover for a valuable good, vehicle or land from an insurance company, most of them will offer a cover that will protect you against the damage of the insured item if that damage has been caused by flooding. Like in any other insurance, flood insurance too requires the payment of a premium. A premium is defined as the initial amount that goes towards covering your expenses. One needs a premium in order to buy an insurance cover. The provision of flood insurance however depends on a lot of factors. It is not easy to obtain a flood insurance cover by just applying for it online or over a phone call. All flood insurance applications demand a host of information. Topography is one of the most important deciding factors. Often the insurance companies take time to analyse the topography of the land by referring the maps to locate if the area is a low lying one or is sufficiently safe in terms of protection from floods. Only after this analysis is done, the private insurance company will grant the flood insurance cover.

Flood insurance covers are still not very popular with most of the people. It is probably because their occurrence is not that frequent, many people fail to judge the impact that it can have even if it does not occur regularly. It is mainly because of this that chaos usually follows a flooding phenomenon and often the government is blamed for misappropriation of funds towards rebuilding homes. If each home was insured against flooding through the flood insurance scheme, such a situation would never arise. The private insurers after inspection would set about restoring the homes and there would be no chaos.

Problems inherent in flood insurance schemes

Most of the times, the standard economic thumb rule cannot be applied by the insurance companies when settling the flood insurance claims. Usually, there are a large number of people who opt for an insurance cover (general insurance). Majority of the times, not all the people actually claim the insurance because no damage has been done for the insured object. The ones who do are funded with the money that has been paid by the others who until then have not claimed for the insurance. At any given point of time, the number of insurers will always be more than the number of claimants thus resulting in the surplus of money for the insurance companies to pay. In case of flood insurance, the number of claimants is more or less equal to the number of insurers. This results in a smaller despatch of money which is really not enough to cover the losses.

From the user’s point of view, he must be aware that most of the property insurance schemes do not cover for damage caused by floods and it is only when the damage has been done that the user realises it. By then it is too late. Hence, if you are living in a flood prone area or an area that can be susceptible to flooding due to any source, you are automatically eligible for a flood insurance policy.

Flood insurance protection

Flood insurance is very important in case you are settled in an area which is very prone to floods. Flood insurance will protect you from severe property losses, due to floods.

Because of floods, there is so much destruction to houses and other properties like boats for example. So many fishermen lose their only source of income. Their boats are broken down to pieces by the strong tide of water flow. So in totality, boat insurance is also a type of flood insurance, since flood insurance will cover any property damaged due to the ravaging action of floods.

Hence, in this way, boat insurance provides relief to many a people during natural calamities or even accidents and helps them overcome it and move on with life.