If you’re debating whether to purchase flood insurance, you have good reason to. For most of the United States, 2017 has been a banner year for rainfall. In fact, flooding is the most common and costly natural disaster in the county, causing billions of dollars in economic losses each year, according to the Federal Emergency Management Agency (FEMA).

While a flood insurance policy can be a little pricey — in 2015, the average annual premium was about $700 — it doesn’t compare to the losses severe flooding can cause. In 2015, the average flood claim was $39,184, and in 2012, the year of Superstorm Sandy, it was a whopping $61,435.

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Should you buy flood insurance?

Standard homeowners insurance policies cover losses from wind, fire and theft, but not from floods. If you’re in a FEMA-designated high-risk flood zone, you are legally required to purchase a policy.

But even if your area is only a low- to moderate-risk area, your mortgage lender may insist on a flood insurance policy, explains Michael Barry, spokesperson at the Insurance Information Institute, a not-for-profit organization that provides consumers information about insurance.

“It’ll come up as you do the deal,” he says. “A lot of times, a lender won’t allow you to close without a flood insurance policy because they have significantly more exposure than you do.”

You may be at risk for a flood even if you don’t live close to a lake, ocean or river (think melting snow or flash floods in desert canyons). According to FEMA, more than 20 percent of flood claims come from properties outside high-risk flood zones.

Your real estate agent can help you determine whether to purchase a policy, as can these resources:

  • FloodSmart.gov, the FEMA site created to help homeowners understand flood insurance and what to do if a home is flooded.
  • The Community Status Book, which lists the 22,000-plus communities that participate in the National Flood Insurance Program (NFIP).
  • The FEMA Flood Map Service Center, which lets you use your address to find your official flood map.

Whether or not you’re living in what FEMA has designated as a high-risk flood zone, you can purchase national flood insurance if your city or municipality participates in the program.

Why national flood insurance?

Before the late 1960s, insurance companies didn’t offer flood insurance. The government had built dams, levees and other structures to hold back flood waters, but that was small comfort to people whose homes were swept away if a dam overflowed or levee burst.

The government created the National Flood Insurance Act of 1968 to deal with the increasing damage caused by floods and to reduce the need to dip into taxes to help flood victims. Besides flood insurance, the law also established floodplain management and flood hazard mapping services.

“Private-sector insurers found flood losses to be so haphazard and unpredictable that they couldn’t properly underwrite policies,” Barry says. You can still buy private flood insurance from some carriers, he adds, but notes that about 97 percent of flood risk in the U.S. is underwritten by the NFIP.
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How does flood insurance work?

Barry explains that to buy flood insurance, start by contacting an insurer. You’ll need to show proof of purchase before you can legally close on a home in a high-risk zone. And, like a standard homeowners insurance policy, this annual premium will be figured into your monthly mortgage payment.

If your home sustains flood damage, you’ll need to contact your insurance company and have them send a flood insurance claims adjuster to assess the damage.

The timeline for when the claim will be paid out depends on the damage. If the flooding is extensive, it may take a while.

The federal maximum coverage limit is $250,000 for a structure and $100,000 for contents.

“For most people, that’s sufficient,” says Barry, “but in higher-end areas, private insurers can sell you an extra policy that kicks in when you’ve exhausted the national program.”

Basements typically aren’t covered by a flood policy, Barry warns.

“It’s for water from the ground up … If your living room gets soaked, the flood policy will provide coverage for the structure and the contents.”

But even if you don’t have flood insurance and the federal government has declared your community a disaster area, you may still be eligible for FEMA’s direct aid program and can apply for federal aid money.

Bottom line? Do your research to determine your home’s flood risk — it could be well worth the investment to have peace of mind.

Jessica Santina is a Northern Nevada-based freelance writer and editor for MoneyGeek.com whose work has appeared in numerous publications, blogs and websites.