Updated: August 2015
Q: I've heard that flood damage isn't covered by homeowners insurance. Is that true of every company? What else should I know?
Yes, most insurance companies specifically exclude floods from their homeowners coverage, says Christina Shaw, an Allstate agency owner in Bellmore, New York. Flood insurance is a separate policy that's offered through the federal government's National Flood Insurance Program, though it is sold and managed by private insurance companies.
When you think about flooding, you may envision water-logged areas along the coast. But what about people who don't live in coastal areas — do they need flood insurance, too?
Shaw says they should consider it. "More than 20 percent of flood claims actually happen in moderate-to-low-risk areas," she says.
To understand your own exposure, you can review the flood risk maps put out by the Federal Emergency Management Agency, but Shaw says the maps can be difficult to navigate, so calling your homeowners insurance agent may be faster. "It takes me all of two minutes to determine your flood zone," she explains.
So, what else does Shaw think people should know about flood insurance?
- Premiums don't vary, but companies do. Flood premiums are the same across companies, says Shaw, because the federal government actually provides the coverage. But the company you choose matters because it'll be your point of contact when something goes wrong. Shaw's tip: Consider buying flood and home policies from the same company, because you could have multiple claims arising from the same incident. "When that happens, it can make life easier to have a single agent to call," she explains.
- There's a 30-day wait. A flood policy doesn't take effect until 30 days after you purchase it, so you can't just buy it when bad weather looms and expect to have same-day coverage, says Shaw. The exception? If you're closing on a home and buy flood insurance on the day of your closing, she says.
- You have to pay it in full.There's no monthly option to pay the premium, as there is with a homeowners policy, says Shaw; you have to pay it in full for the entire year. That may be an expense that people in high-risk (and, subsequently higher premium) areas need to plan for, she says.
- There's limited coverage for basements. When you buy flood insurance, a standard policy will only provide structural coverage for your home. But you can opt to add contents coverage to help protect your possessions. When it comes to basements, though, only washers and dryers and some machinery would be covered by the contents coverage on a flood policy, says Shaw. "Your personal possessions are never covered in a basement," she says. "Period."