When it rains, it pours. And when it pours, rivers and creeks have a tendency to flood. Water can be a very powerful force when it becomes abundant enough, and flood damage can be very costly if you need to make repairs to your home. Unfortunately, many property owners are unaware that flood protection is not included in their homeowners insurance and must be purchased separately.
The NFIP was instituted by Congress in 1968 to provide flood insurance policies to homeowners, business owners and renters in communities that participate in the program. The flood program, which is administered by FEMA, works with more than 90 private insurance carriers to provide flood insurance to cover damages that result from flash floods, hurricanes, winter storms or heavy rains.
The premiums do not change from company to company; they are set by FEMA and are based on factors like the type of construction of the home, the land the house is built on, the location of the home within the flood plain and other factors. The lower the risk of flood damage, the lower the premium often is.
An important thing to know is that you can buy flood insurance anytime; however, there is a 30 day waiting period after paying your first premium before the policy goes into effect. Don’t wait until a flood warning to consider buying flood protection.
Flooding occurs in all 50 states and is not covered in home or renter’s policies. But does that mean everyone should have flood insurance? The choice comes down to your level of risk. Unfortunately, that can be difficult to determine.
According to FEMA, most people are likely to need flood insurance at some point. FEMA has flood plain maps for every area in the country, and it lists areas as 10-year, 30-year, 50-year or 100-year flood plains based on elevation, slope of the land, soil, proximity to water sources and other factors.
There are actually several kinds of flood insurance coverage you can purchase:
For standard dwelling coverage, you have two options:
You can opt to purchase just one of these, or both - but the NFIP strongly recommends homeowners purchase both coverage options. It's a good idea to speak with your lender, as a mortgage company can also require you to carry a certain amount and type of flood coverage.
These two combined coverage types will cover most things in your home, with some exceptions. For example, you will not be reimbursed for damage to most cars and ATVs, any belongings outside of the building (including landscaping, septic systems, patios, hot tubs, and swimming pools), currency, precious metals, or stock certificates.
If you have a multi-story home, the coverage could be more complicated depending on your location in a flood zone and the age of your home. Basements, crawlspaces, and walkout basements have limited coverage, no matter the age or type of home you have. If your home has any of these items, make sure to ask your insurance agent about how your items can be protected from flood damage. For example, even if you carry both building property and personal property coverage, you may not have any insurance protection for the following items in your basement:
A flood insurance policy won't ever pay out any more than the exact amount of the policy (i.e. never more than $250,000 for structural damage). You can choose to buy building property flood insurance that's either at replacement cost value (RCV) or actual cash value (ACV). You can only buy personal property flood insurance at ACV coverage amounts. These two types of reimbursement generally break down this way:
Replacement cost value: The cost to replace items that are damaged, without taking into account depreciation over time
Actual cash value: The cost to replace items at the time of the loss, taking into account depreciation
Flood insurance is complicated. It's highly recommended that you speak to a professional agent who can help you get the coverage you need and fully understand your options.
Flood insurance covers physical damage to structures affected by flooding from heavy snowmelt, runoff following heavy rainfall, and so on. Your flood insurance policy will also cover any damage caused from erosion due to currents or uncommon water cycles (for example, if your home is built along a shore that collapses due to waves, currents or rising water).
Damage caused by mudflows or mudslides can be covered, but the policy may have very specific definitions for a covered mudslide event. It’s important to read your insurance documents if you are in a high-risk mudslide area.
Premiums for flood insurance coverage vary greatly from state to state and area to area, and depend on a variety of factors including flood risk and the value of the home being insured. Flood insurance can be as low as $130 per year, for a renewable one-year policy.
If your community participates in the National Flood Insurance Program, you can buy your flood insurance policy from a local insurance agent. An agent who lives in your area will have the best information about flood insurance that is specific to your community and can help determine your need for this coverage.