FLOOD INSURANCE 101: All About Flood Insurance

Due to climate change and rising sea levels, flooding is becoming more common in the US, so it’s good to stay informed and protected.

If you live on the coast or even close to lakes or rivers, you probably already understand the importance of protecting your possessions from flooding. But here’s the leap of the cat, even if it doesn’t seem like it, your home or business could be at risk.

If you were missing a complete guide to Flood Insurance, now you don’t. Read below for everything you need to know today about insurance that can save your home and your lifestyle.

What is Flood Insurance?

Flood Insurance is the insurance that protects you against floods. Flood Insurance covers losses from flood-related water damage and can help protect and/or replace your belongings. If your property is damaged by flooding, your insurance company will cover the reconstruction or repair costs and pay the actual cash value of your personal items.

Which property is eligible?

Flood insurance coverage did not usually exist until the federal government got involved. In 1968, Congress created the National Flood Insurance Program (NFIP) to make Flood Insurance available to eligible communities through federal grants. The NFIP is administered by the Federal Emergency Management Agency ( FEMA ).

In most cases, it is at the initiative of the communities to apply for NFIP coverage. However, it is up to the government to determine whether a community is flood prone and to require it to meet federal flood program standards.

Almost any building with walls and a roof, primarily above ground and fixed in a permanent location, is eligible for coverage under a flood insurance policy. The policy may cover a building, its contents, or both.

What does Flood Insurance cover?

Depending on your policy, flood insurance may cover some or all of the following:

  • The foundation and structure of your home
  • Garage and other separate structures
  • Personal possessions, including furniture, clothing and electronics (actual cash value)
  • Built-in appliances, including refrigerators, dishwashers, and stoves
  • Carpets and permanently installed household accessories (sinks, faucets, light fixtures, toilets)
  • Air conditioning unit and oven
  • Hydraulic and electrical systems
  • Up to $2,500 worth of valuables such as jewelry, collectibles, art objects and fur coats
  • rubble removal

The NFIP provides up to $250,000 in coverage for your home structure and up to $100,000 for your personal effects. If you need higher limits because your property value is greater than the coverage available, you can purchase coverage from a private insurer.

Private flood insurance can complement your NFIP policy or replace it entirely.

NFIP policies cover the described property against all direct losses by or from a flood at the described location. Indirect financial loss or loss of use (additional living expenses) are not covered.

Your possessions, which are elsewhere, will also be covered if they are above ground or outside the special flood risk area for up to 45 days if they are removed by you to protect them from flooding.

5 Myths and Truths about Insurance in the USA

Personal possessions in a basement or backyard are not covered.

Under NFIP insurance, the home’s coverage amount is based on replacement cost, while your personal possessions are insured for their actual cash value. For example, replacing a piece of furniture lost in a flood will cost $1,000, but if that piece of furniture was worth $700 at the time of the tragedy, that’s the amount you’ll get from the NFIP. If you choose a private insurance company, you will be able to purchase coverage for your assets at replacement cost.

What does insurance consider flooding?

Before moving on to the exclusions of flood insurance coverage it is important to establish what is considered Flood by insurers and the NFIP.

A flood includes the following points:

  • overflow of inland waters (lakes, ponds, rivers…) or tides
  • unusual and rapid accumulation or runoff of surface water from any source, unless there is general flooding
  • accumulation of water covering two or more acres (over 8000 m²) of soil that is usually dry
  • landslide caused by accumulation of water in the ground or water table
  • land collapse as a result of excessive erosion caused by flooding

Backflow of sewage caused by a blockage in a property is not considered flooding and is not covered . Also, water from a drain, washing machine, dishwasher, or water tank that has drained into your home is NOT a flood. Damage caused by these is considered “captured” water damage.

If due to any law or ordinance in your state the cost of repairs increases, the policy will pay up to $30,000 to cover the extra expenses. This coverage is called the Increased Cost of Compliance.

What does Flood Insurance NOT cover?

Whether you purchase a policy from the NFIP or a private company, the following exclusions may apply:

  • Damage caused by sewage or water pump
  • Damage to motor vehicles (car, ATV, motorcycle, boat, etc.)
  • Mold and termite damage caused by flooding
  • Possible financial losses if you are unable to conduct your business from home
  • Stock certificates, bills, banknotes, coins, bonds, evidence of debts, gold and manuscripts
  • Cash and Gems above specified limits
  • Pools, whirlpools and patios
  • Newly constructed buildings that are in or on the water
  • Fences, retaining walls, bulkheads, wharves, bridges, docks and other open structures in or on the water
  • Landscaping, lawns, trees, shrubs, plants, plantations
  • Bed
  • Underground structures and equipment such as wells and septic tanks
  • Structures such as gas or liquid storage tanks (does not apply to silos, grain storage buildings or their contents).

These are some of the most relevant exclusions from flood insurance. If you have a very valuable item (financial or sentimental) that is not on the list, check with your insurance agent whether this item is covered or not. 

Do I need flood insurance?

If you have questions about the risk of flooding in the area where you live, you can start by asking 6 Flood Questions to your neighbors and the realtor you trust, they will help you understand the past experiences of your street and your neighborhood. . 

But is the past alone enough to determine your risk? No, although if there is any history of flooding it is already a very important clue. Being an immigrant, there is a great possibility that you still don’t know the past of your neighborhood, nor your neighbors and that you are in a more economical house, right? Know that cheap homes may be more exposed to flood hazards.

If you are buying a home, it is very likely that your lender will require this insurance before they even approve your mortgage. After all, banks know the high risks of flood-related damage. FEMA estimates that just an inch of water entering your home can cause up to $25,000 in damage.

There’s no law requiring you to have flood insurance, but even if you don’t live in a flood zone , heavy rain, melting snow and sea surf can cause floods, and they arrive without warning. A good part of the claims come from low or medium risk areas.

Does auto insurance cover flood damage?

Yes, if you have comprehensive coverage on your flood-damaged vehicle.

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