Flood Insurance 101
Published: September 2014
If you haven't prepared your home for the watery impact of the next big storm, you are (unfortunately) not alone. Only 13 percent of U.S. homeowners have flood insurance, according to a 2014 survey by the Insurance Information Institute.
Are the remaining 87 percent just betting that a flood won't hit their homes? Or do they mistakenly believe their homeowners policy offers protection against a flood?
In either case, there's a strong argument to get better informed.
Homeowners Insurance Typically Does Not Cover Damage from Floods
For one, you should know that flood damage isn't typically covered by homeowners insurance. To get flood coverage, you can buy a separate flood policy through the federal government's National Flood Insurance Program (NFIP). Talk to an agent about purchasing an NFIP flood policy through a private insurance company who participates as a Write Your Own (WYO) Company in the NFIP.
You should also understand that flood insurance isn't just for homes in high-risk areas. The NFIP says that all 50 states have experienced floods or flash floods in the past five years, and that more than 20 percent of the claims it handles come from the moderate-to-low risk regions.
What Protection Does a Flood Policy Offer?
So, what can a flood policy help protect? Well, you can decide to insure your home, your personal property, or both. Here are some of the basics for these two coverages, based on information available on the NFIP's FloodSmart.gov site:
Building property coverage
What it typically provides coverage for: the building and its foundation; plumbing and electrical systems; central air and heating systems; attached bookcases, cabinets and paneling; and a detached garage (other detached structures need their own policy)
How it typically pays out: Replacement cost basis (what it would take to rebuild the home)
Maximum limit available: $250,000
Personal contents coverage
What it typically provides coverage for: clothing, furniture and electronics; curtains; some portable appliances; freezers and the foods within them; and certain valuables like art (up to a specified limit).
How it typically pays out: Actual cash value basis (which is replacement cost minus depreciation)
Maximum limit available: $100,000
What's Not Typically Covered by Flood Insurance?
Equally important is knowing what's not covered by flood insurance. However, please refer to the FEMA Summary of Coverage for information on flood policy terms, conditions and exclusions. Here are a few types of property and expenses the NFIP says fall outside the scope of a basic NFIP flood policy.
- Moisture or mold/mildew damage that "could have been avoided by the homeowner" (for example, the lack of timely remediation)
- Currency and precious metals, and paper valuables like stock
- Outdoor property like decks, fences, patios, landscaping, wells and septic systems, and hot tubs and pools
- Living expenses, like temporary housing (if flood damage deems your home uninhabitable)
- Cars and other self-propelled vehicles (but your auto insurance may offer some coverage for your car)
Add to that many below-ground rooms like crawl spaces and basements (coverage is limited, according to the NFIP). Some items in these spaces (like the furnace) are typically covered under building coverage. Others (like the washer/dryer) are usually covered under personal contents coverage. And some items — like your personal effects — may not be covered at all when they're kept in below-ground rooms.
Talk to an agent to help make sure you're clear about the coverage details of a flood insurance policy and to help you make the right choices for your situation. Excess flood insurance is available through some insurers; and it might be a good option if you're interested in increasing the limits available from an NFIP flood policy.
Of course, you should also remember that there are other ways your home might sustain water damage, other than a flood. That's why, in addition to understanding flood insurance, you should also get to know your homeowners policy and the various protections it offers.
Do that, and you'll go a long way to making sure you're protected against the elements, whenever and however they may arrive.