When you make monthly mortgage payments, a portion of that money goes toward the loan principal, and a portion is applied to the interest. Amortization is all about understanding the relationship between the principal and the interest, and how this relationship changes over the life of the loan.
We’ve been studying pretty hard for weeks now in Know Your Mortgage, and just like any good class room, now feels like the time that you readers deserve a vacation. The important part of that last sentence is that it “feels,” like a vacation because this is a blog and stopping the flow of information would be a detriment to you and the Zing Blog. Instead of taking a superfluous week off to get cornrows in Cancun, we’ll take this week to discuss something vital and often overlooked by homeowners in the warming weather: Flood Insurance.
What Is Flood Insurance?
Flood insurance is purchased separate from your mortgage, like any other type of insurance. It covers flood damage, which may seem unnecessary if you don’t live in a flood zone, but floods are the most common natural disaster the United States. It’s one of those “better safe than sorry” scenarios. As we reported in this blog about a year ago, the average claim on flood damage is around $48,000. Just go ahead a scroll through the flood facts page on floodsmart.gov and you’ll find an overwhelming amount of reasons to get flood insurance; like the annual losses from floods was more than $2.9 billion from 2002-2011, or living on new land development increases your chances of flooding dangers.
Do I Have to Get Flood Insurance?
The answer is it depends, but you should regardless of requirements because it’s incredibly helpful. If you have a government-backed mortgage, and you live in a coastal region or a high-risk flood zone, you are required to have flood insurance. If you’re not sure if your house is in one of these areas, either talk to a local insurance agent or go to floodsmart.gov and fill out a quick profile to determine this. Despite not being covered by regular homeowners insurance, getting flood insurance is incredibly simple; you can either contact an insurance agent on your own or reach one through the National Flood Insurance Program.
If you don’t live in one of these flooding-prone areas, again, it’s strongly advised that you still get flood insurance. Referring again to the flood facts from floodsmart.gov, floods happen in all 50 states. Construction and sporadic weather are just a few of the constantly changing variables that can produce a flood in your area when you would normally think it’s impossible. I checked my zip code for flooding probabilities just for the heck of it while I was researching this post, and I was honestly shocked when I found out my city was in a flood zone. I live in a flat, urban area and would have never thought my city could have been that place.
Seeing a stained murky ring around the bathtub is enough to make me angry, considering the gross cleaning that will follow; now imagine that with a six inch water stain around the entire first floor of your house. It’s hopefully enough to make flood insurance seem like the important addition that it is, because countless Americans are left thinking “woulda, shoulda, coulda” about it after their house is trashed. If you have any lingering questions on the topic, please ask away below.