What Does Flood Insurance Cover and How Does it Work?
A common, but potentially devastating mistake homeowners make is assuming that homeowners insurance will cover the damage if their home floods. However, homeowner’s insurance commonly doesn’t cover flood damage. If you don’t have coverage, a flood can leave your family homeless, with no way to repair or replace your home.
What Standard Homeowner’s Insurance Does Cover
Basic homeowner’s insurance covers two main areas of damage: personal property and belongings, and personal liability. Property and belongings helps you if your home or personal belongings are damaged or destroyed. Personal Liability protects you if someone is injured in your home.
Most standard policies also cover loss of use, meaning the insurance company will pay for the homeowner to stay elsewhere while the home is being repaired.
Basic homeowners insurance covers financial loss caused by weather and catastrophic events. These include lightning, hail, fire, and explosions. Most homeowners policies do not, however, protect against flooding, earthquakes, neglect, power failure, war, or intentional loss.
Do You Need Flood Insurance?
A flood can happen anywhere, and at any time. The most common area for floods to occur is in a flood plain. A flood plain is any area where large amounts of rain can cause standing water build up and a flood. To find out if you live in a flood plain, you should check the Federal Emergency Management Agency (FEMA) Flood Map.
However, floods can occur outside of floodplains as well. Damage from floods can cost you hundreds of thousands of dollars and can decimate your home. Consult your homeowner’s insurance agent to see if they recommend you purchasing flood insurance.
What is Covered By Flood Insurance?
Flood insurance only covers damage directly stemming from floods. FEMA defines a flood as an excess of water on land that is normally dry. This excess must affect\ two or more acres of land or two or more properties to be a flood.
Essentially, flood insurance covers two things: your house and your personal possessions. Building coverage handles things like plumbing and electrical systems, furnaces, built in appliances, carpeting and other flooring (permanent), foundation and structure, and detached garages. On the other hand, contents coverage handles things like clothes and furniture, non-built in appliances like a washer or microwave, and valuable items like artwork.
Flood insurance does not cover cars or trucks, swimming pools, items kept in a basement, money, stock certificates, valuable paperwork like birth certificates, septic systems, or financial loss caused by business interruption. Your auto insurance policy should cover your car or truck in the event of a disaster like this.
When you’re determining whether an event is covered under flood insurance, the primary question to ask is what caused the flood. Water damage that happened when a pipe burst isn’t classed as a flood by FEMA.
How Does Flood Insurance Cost?
The federal government only allows you to purchase up to $250,000 worth of protection on your home from FEMA. This means if a flood hits, you will only be reimbursed up to $250,000 worth of your property’s value. You can also purchase up to $100,000 worth of contents coverage on your personal items.
If you wish to purchase more than the FEMA coverage limit, you will need to buy excess flood insurance through private insurance companies. However, you can only purchase excess flood insurance after you have purchased standard flood insurance through FEMA.
Some excess flood insurance providers may also go beyond what’s covered under the NFIP program. This might include reimbursing you for loss of income, additional living expenses (ALE) coverage, and even costs of flood prevention, such as sandbags. However, availability of these types of coverage varies by insurance provider, so check with multiple insurers if there is a specific coverage you need.
Flood insurance varies in price depending on your location’s risk. If you live in a high risk area, it is likely flood insurance will be more expensive for you than if you lived somewhere else. The average cost of a $100,000 flood policy is a little more than $400 annually. If you’re curious about the exact cost of insurance in your area, most insurance companies will give you free quotes fairly quickly.
Where Do You Get Flood Insurance?
Standard flood insurance can only be purchased through the National Flood Insurance Program (NFIP). The program exists under the umbrella of FEMA, and is sold there to ensure relief in a disaster. However, they work through your homeowner’s insurance where possible to ensure all of your coverage is tied together.
If you’re interested in flood insurance, call your homeowner’s insurance company first. If they don’t offer FEMA coverage, check the FEMA site to find a provider who can help you buy flood insurance.
However, if you’re interested in higher levels of coverage, you’ll have to add extra coverage through a private provider. This extra coverage is called excess flood insurance. Depending on what works best for you, you can choose to have two different policies, or bundle them together. If you choose not to have a separate FEMA funded policy, you will still have at least the minimum requirements in your policy.
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