- Flood insurance protects one's home and property from damage caused by flooding and other phenomena that result from flooding such as mudslides. One of the most common misconceptions about flood insurance is that standard homeowner's insurance protects a house from any damage that may befall it--fire, flood, earthquake or hurricane. This is not the case. Since some homes and communities are in areas that either have weather that makes it extremely unlikely to flood or topography that makes them immune to flooding, standard homeowner's insurance does not cover flood damage, and a separate insurance policy must be purchased to protect against it.
- If you live in an area that is at extremely low risk of flooding, such as on a hill or mountain, you may not be able to buy flood insurance. A private insurer would most likely sell it to you, since you pose a small risk, but there may not be any insurance companies in your area that offer flood insurance, because very few, if any, people will want to purchase it.
- Another issue with getting flood insurance through a private insurer is that those in high-risk areas may have difficulty finding a lender to insure them. Unlike fires, which are essentially random, and which almost every homeowner insures against, far fewer homeowners opt for flood insurance, and those who do know they are at high risk. This means the insurance company can't spread the risk over a huge number of customers because the only people trying to get flood insurance are those at high risk. As a result, the national government created a program that offers flood insurance to communities that lie in high flood-risk areas.
