Floods can come anywhere and floods can be costly. According to the Federal Emergency Management Agency, just one inch of water can cost up to $25,000 in repairs. In the US alone, according to the National Severe Storms Laboratory, floods kill more people each year than tornadoes, hurricanes or lightening.
According to federal statistics, floods are the number one disaster in the country. The question in the mind of many residents is what will be my insurance cover? Most homeowners insurance does not cover flood damage. If you are looking at property in locations where there is a high risk of flooding, your mortgage lender is legally mandated to require you to purchase flood insurance.
But how do you know why you need to buy flood insurance? And what exactly does flood insurance cover? Let us know what exactly is flood insurance and what does it protect you and if you are going to buy your home then whether you need to buy flood insurance or not.
What exactly is flood insurance?
Flood insurance is a separate policy that can cover buildings, the contents of a building, or both. Flood insurance is a type of home insurance that protects your home and belongings in the event of flood damage. Flood insurance can cover your property and its contents up to a certain amount, depending on the coverage limits of your policy. Generally, standard home and renters insurance policies do not cover flood damage, so you will need to purchase separate coverage. The flood risk of an area is determined by the Federal Emergency Management Agency (FEMA).
What is covered by flood insurance?
When comparing when shopping for flood insurance, it is wise to be sure of what flood insurance covers. A National Flood Insurance Program policy is divided into two types of coverage – property and personal contents. Flood insurance provides coverage for up to $250,000 in property damage and $100,000 in personal property damage when you purchase flood insurance through the National Flood Insurance Program (NFIP). Let us see what flood insurance will usually cover –
Building Property Coverage :-
- Your home’s physical structure, its foundation, electrical and plumbing systems.
- Air and heating systems, including appliances such as air conditioning, refrigerators and stoves, furnaces, or water heaters.
- Permanently installed items like attached bookshelves, cabinets and cabinetry.
- Window curtain made of pallets, detached garage, garbage removal are included.
Personal contents coverage :-
- Clothing, electronics, and household items, including curtains, portable appliances, freezers, and the food inside them.
- Washing Machine, Dryer and Freezer, Striped Window Curtains Valuables (up to $2,500).
- Personal property coverage typically includes washing and drying machines, freezers and food inside them (refrigerators not included), and portable air conditioners.
What does flood insurance not cover?
While flood insurance covers many types of building and personal contents, it is also important to know what flood insurance does not cover. As per the NFIP, here are some examples of assets and expenses that are outside the purview of a basic flood insurance policy:
- Moisture, mildew, or mold damage that can be avoided by a homeowner.
- Precious metals, money and valuable papers such as stock certificates, trusts or wills.
- Your home’s exterior assets such as decks, fences, patios, landscaping, trees, wells, septic systems, hot tubs and swimming pools.
- Temporary accommodation expenses due to floods or loss of income due to the insured property.
- Cars and other self-propelled vehicles.
- Items usually covered under personal content coverage may not be covered at all when they are placed in downstairs rooms.
- Whenever you buy flood insurance, talk to an agent to help you determine what flood insurance covers and what doesn’t.
- You should also remember that floods are not the only potential source of damage to a home. That’s why you should also review the coverage that your homeowners insurance policy offers.
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Do I need flood insurance if I don’t live in a flood zone?
Flooding is the #1 most significant and most devastating natural disaster hitting homeowners each year in the United States. Anywhere it can rain, flooding can happen, which makes flood insurance even more important. Often flood insurance is considered as an alternative insurance for your home unless your mortgage lender requires it because you live in a high-risk flood area. However, flood insurance is something every homeowner should consider as flood damage is not covered by your home or renters insurance policy. Even if your home is not in a flood zone, you still need to get flood insurance as a homeowner for the following reasons.
- Floods can happen anywhere
- The risk is real
- You can’t pay for flood damage on your own
- Flood water can damage your home in many ways
- Why risk the consequences?
- Disaster assistance is often not available
- Risk does not stop on a single line on a flood map
When is flood insurance required?
Flood insurance coverage is required when the loan is secured by property located in a Special Flood Hazard Area (SFHA), or a Coastal Barrier Resource System (CBRS) or otherwise protected area (OPA). Flood insurance is necessary if you have a government-backed mortgage and your home is located in a Special Flood Risk Area (SFHA). FEMA defines SFHA as an area that is at risk of erosion due to flooding, mudflow, or flooding. If your home is located in one of these areas and you don’t have a government-backed mortgage, chances are your lender will still require you to have flood insurance.
How Much Flood Insurance Do You Need?
If you live in a high-risk flood zone, you should consider how much insurance you need. Your flood insurance coverage should be equal to the value of your home and property so that you are reimbursed in case the worst happens. Before determining your coverage amount, find out the following:-
Determine the amount that will be spent on rebuilding your home. The cost of remodeling your home is based on a number of factors, including the size of your home, the quality of the materials used, and the cost of labor in your area. The coverage of the property in your policy should be equal to the replacement value of the home, not its market value or the outstanding amount of the mortgage principal.
Next, select the amount that will be required to replace your items. Essentially, this includes everything that is inside your home, such as furniture, clothing, appliances, and other items. Setting up a home listing with property descriptions and prices is an effective and convenient way to find out the value of everything you own.
How to get flood insurance
If you are a homeowner or renter, you can get flood insurance from the federal government or through a private company. If you have a mortgage and live in a high-risk area, your lender may also require it.
There are no restrictions to buy insurance, you don’t need to live in a floodplain or high-risk area. However, the cost of this type of insurance is quite high, so you should consider this option only if you live in an area that will be affected by floods.
Flood Insurance through NFIP :- If you want to buy insurance through NFIP then you can buy only through an authorized agent or insurer. There is no option to buy insurance directly from the government. The most important thing is that even if you buy through any medium, its premium is the same. The rates are set by the NFIP and depend on predetermined factors such as the value of your property, the year it was built and the risk of flooding.
You can contact the NFIP Referral Call Center at (888) 379-9531 to obtain agent or insurer information. When you sign up for flood insurance through NFIP, there is a waiting period of 30 days before your coverage begins. So you should not wait till the last minute to buy the policy.
Buying flood insurance by private insurance companies :- Today, there are also some private insurance companies that offer flood insurance, although this option is not available in all states. The waiting period for this type of flood insurance is usually only 14 days while the premium may vary. However, the main advantage of this insurance is that you can generally buy more coverage.
Frequently Asks Questions
Q1. How much does flood insurance cost?
The cost of flood insurance depends on where your home is located and whether you use an NFIP policy or private insurance. The average cost of a flood policy is about $700 per year, according to the Federal Emergency Management.
Q2. Where do I buy flood insurance?
When it comes to flood insurance, there are only two options: NFIP and private flood insurance. NFIP is a major player in flood insurance. Although you cannot buy insurance directly through NFIP, you have to approach a licensed insurance agent or insurer.
Q3. Will flood insurance in your basement cover personal property?
NFIP insurance does not cover damage to any personal property stored in your basement or basement in most cases. There are some exceptions for heating or cooling equipment permanently installed and connected to a power source.
Q4. Does flood insurance cover additional living expenses?
Unfortunately, flood insurance from NFIP does not cover additional living expenses. However, private flood insurance often covers additional living expenses.
Q5. Is there a waiting period after taking out flood insurance?
When you take flood insurance through NFIP, there is a waiting period of 30 days from the time the policy is paid till the policy becomes effective. Although in some cases there is some relaxation.
The Bottom Line
If you are looking for a flood insurance, or want to know whether flood insurance is a good idea for you, it will depend on many factors, mainly where your property is in an area where the risk of flooding is high. However, floods can happen anywhere.
The most important misconception among people with flood insurance is that buying a policy means everything is covered. Insurance policies do not cover all possible financial impacts caused by floods or other damages, such as fire or thunderstorms. Keep in mind that if you want to protect yourself from the cost of flood damage, you will need to purchase a separate policy in addition to your homeowners insurance.