There are consequences to canceling. Know them before you decide.

There are some major impacts that change the game when you decide to cancel your flood insurance. Don't be blindsided and make a smart decision. Here's what you need to consider before canceling your flood insurance.

1. Rates will change.

When you cancel your insurance, there is a chance that you may never get the rate you had back. As rates fluctuate up and down with the market, when you need it, your premium may be out of your price range, and depending on your carrier and the type of policy you choose, rates can come back far higher than before you canceled.

2. There could be a wait period.

If you find yourself in a place where you need insurance again, you will be subject to the usual wait periods. Is a hurricane coming or a huge storm? You may be too late to buy flood insurance.  You have some options, but some flood insurance plans have a 30-day waiting period, some have a week-long waiting period, and others have no waiting period at all. 

The NFIP flood insurance policy will most likely have a 30-day waiting period, with some exceptions. If you purchase an NFIP plan to make, extend, renew, or increase a mortgage loan, or increase your coverage at policy renewal time, there is no waiting period. There is a one-day waiting period for newly designated high-risk Special Flood Hazard Area buildings after they revise flood maps. Lastly, you can have your waiting period waived if your property was affected by flooding on burned federal land and you just purchased the land within the last 60 days. 

3. You might hurt your relationship with your mortgage lender.

Think the bank isn't going to know if you cancel your policy? Think again. The laws have changed and the Biggert-Waters Flood Insurance Reform Act of 2012 and the Homeowner Flood Insurance Affordability Act of 2014 have increased their fines astronomically, causing banks to rethink their checks and balances process. Since the banks are held extremely accountable, you may find yourself paying a “force-placed” flood insurance policy. These policies can be as much as three times your original rate. What's worse? These new rates will affect your standing with your mortgage lender and can mess with your escrow.

4. Yeah, you may have paid off your loan, but there are still floods.

It's amazing that you paid off your home, and yes, it is true that you don't HAVE to have your flood insurance policy anymore, but what are you going to do if it floods? The risk doesn't change just because the federal mandate does.

According to FEMA, more than 99% percent of the counties in the United States have experienced flood-related impacts. Flood damage is more common than you think. It can completely devastate entire towns, wreak havoc for displaced families, and force residents to pick up the pieces left behind by the #1 natural disaster in our country. Heavy rains, melting snow, improper drainage, and failing flood prevention systems cause flooding across the board, from properties outside the flood zone to high-risk flood zones. 

Flood insurance is the only guarantee you have when it comes to experiencing any flood damage in your home or on your property. While it can be pricey, it can be a lifesaver for your finances if you are ever left with a severely damaged or destroyed home due to flooding. So, give yourself peace of mind. You can't afford not to have flood insurance.