Do You Need Flood Insurance?

Ever heard that if you fail to prepare, you prepare to fail? That’s true for many things in life, natural disasters like flooding included. Everyone should have an emergency plan and kit for their family’s safety, but what about an emergency plan to safeguard their financial peace of mind? Let’s take a look at flood insurance and how it might fit into your money plan.

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Do You Need Flood Insurance?

Flood insurance is a special type of coverage that protects you if your home gets damaged by a flood. If damage occurs, and it's covered by your policy, you can get things replaced or repaired without needing to cover the costs out of pocket. While flood insurance isn’t required for everyone, it can be an important way to protect your home and livelihood. Here are some things to consider:

• Where You Live: Think about the flood risk in your area. If you live in a place that's prone to floods, like near rivers or the coast, the chances of experiencing a flood are higher. Recent heavy rainfalls have proven that even traditionally low-risk areas can be at risk of flood damage.
• Mortgage Requirements: If you have a mortgage on your home, your lender might make it mandatory to have flood insurance, especially if your property is in a high-risk flood zone.
• Can You Afford the Costs? Think about whether you could handle the financial burden of repairing or rebuilding your home after a flood. Flood damage can be expensive to fix, and the costs can add up quickly. 
• Protecting Your Belongings: Consider the value of your personal belongings. Flood insurance doesn't just cover your home but may also cover your belongings, like furniture and appliances.

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Choosing Flood Insurance

There are heaps of different providers of flood insurance in New Zealand. Sometimes it's a standalone policy, sometimes it's an extra for your house, and sometimes it's bundled in with something like contents insurance. If you’ve decided that flood insurance is a good idea, here are some things to think about:

• What's Covered: Make sure the flood insurance you choose covers the cost of fixing your home and replacing your belongings if they get damaged in a flood. The higher the total value of coverage, the more expensive the policy usually is.
• What's Not Covered: It's important to know what the insurance policy doesn't cover. Some policies may not cover damage from certain events like landslides or tsunamis. Check the policy to be sure you have the coverage you need.
• Limits on Coverage: Pay attention to the maximum amount of coverage the policy offers for your home and belongings. Make sure it matches the value of what you have.
• Waiting period. It's important to know that flood insurance often has a waiting period before it takes effect. It may be worthwhile to get covered ahead of time to make sure you're protected when you need it.

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Alternatives to Flood Insurance

While flood insurance is a popular choice for some people, others prefer to avoid having to pay premiums and prefer to do what’s sometimes called “self-insurance”.

Basically, this boils down to always ensuring that you have an emergency fund of cash tucked away in case of big emergencies. In the case of flood insurance, this might be making sure that you know a) how much your various assets and valuables are worth and b) saving up enough cash to replace them if something goes wrong.

This doesn’t always replace flood insurance - especially if you want to cover the full cost of rebuilding your house; not many people would be able to just have that kind of cash lying around - but it can still be a good supplement so you can reduce the total coverage you need and thus reduce premiums.

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Additional Resources for Flood Preparedness

Prepping for flooding isn’t just about insurance. In New Zealand, there are resources available to help you prepare for floods and understand flood insurance. Here are some useful sources of information:

• Local Government: Your local council's website has flood maps, guides on how to get ready for emergencies, and contact information for authorities who can help during a flood.
• Insurance Companies: Talk to insurance companies that offer flood insurance. They can give you more details about what they cover and answer your questions.
• Civil Defense: The Civil Defense website has helpful resources on how to be ready for emergencies, including floods. They can help you make a plan for what to do if a flood happens.
• Home Inventory: It's a good idea to make a list of all the things you have in your home. Take pictures or videos and keep important documents and receipts safe.

Getting ready for floods is really important to protect yourself, your property and your belongings. If that includes getting flood insurance, just ensure that you know the full ins and outs of your policy before signing on the dotted line. 

Remember to review your insurance policies regularly to make sure they still cover what you need. By taking these steps and considering flood insurance, you can be better prepared to recover financially if a flood happens.

How is your whanau prepared for flooding?

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