The vast majority of homeowner's insurance policies will not typically cover flood damage, which will no doubt come as a shock to many people. Most insurance policies will cover perils such as hurricanes and windstorms, but if you believe you have a specific need for flood insurance you will generally have to use the National Flood Insurance Program to purchase a policy. The National Flood Insurance Program (NFIP) was initially established in 1968, and its main aim was to make flood insurance accessible to members of communities that wish to participate in this particular program. The actual flood insurance program is managed by the Federal Emergency Management Agency (FEMA), and they currently have approximately 90 insurance companies from which home and business owners, and indeed renters, can purchase this type of policy.
The only time that it is mandatory to have flood insurance in place is when a property has been mortgaged by a federally regulated or insured lender, and that property is located in an area that is designated as a high flood risk. If you live in an area that has a moderate to low risk of flooding, you will not be required to have such coverage, although it makes a lot of sense to have this type of policy anyway. It is actually estimated that up to 25% of the flood-based claims come from moderate to low risk areas.
The National Flood Insurance Program has issued set rates to their insurance companies that sell flood insurance. However, the premiums that are charged are likely to differ in accordance with the specific circumstances surrounding the property. Certain factors such as the level of risk, the age of the property, the type of construction, and the stored location and its contents, will be taken into consideration. Flood insurance will typically cover buildings and contents, and can also be offered individually for either element.
Buildings coverage will typically include:
- The building and its foundations
- Electrical and plumbing systems which will also include air conditioners, furnaces and water heaters
- Certain appliances such as built-in items, refrigerators and stoves
- Bookcases, cabinets, paneling and wallboard that have been permanently installed
- Debris removal
Buildings coverage can be offered up to $250,000, although the actual amount of coverage will very much depend on the rate band of the property. You will also find up to 10% of the coverage can be given to detached garages, but any other buildings that are detached from the main property will require a separate flood insurance policy.
Contents coverage will typically include:
- Personal belongings
- Furniture, curtains and also any carpets that do not form part of building coverage
- Portable appliances which may include air conditioners, dishwashers, freezers, microwave ovens and washer dryers
- Any valuable possessions up to a maximum limit of $2500
Contents coverage can be offered at a maximum of $100,000, and once again this will depend on the rate band of the property.
There are also certain exclusions within a flood insurance policy and unfortunately these items will not be paid for. This will include damage caused by mold, moisture or mildew if it is believed that a homeowner could have prevented this from happening. A flood insurance policy will not cover possessions kept outside the building, most cars, loss of cash, precious metals, medical papers, business interruption losses, and you will also find basement water damage has limited coverage.
Unfortunately, a flood insurance policy will not be able to provide any help for the costs incurred if water damage means that you need to vacate your property. However, these expenses will typically be covered by Alternative Living Expenses insurance which forms part of the majority of regular homeowner's insurance policies. It is also advisable that if you are reviewing your flood insurance needs that you check the particular coverage you have for hurricane windstorm at the exact same time. You will often find flooding will be caused at the same time as wind damage, but flood insurance will generally not be able to pay for any non-water related issues.
The Federal Emergency Management Agency (FEMA) website provides a valuable education on flood insurance. They provide details about flood maps for your area, and can also help you to determine whether your house is in a flood hazard area. They also provide information for insurance agents and companies, engineers and surveyors, and details of federal and exempt customers. If you are unsure about whether you require flood insurance, or would like to find out further details, it is highly recommended that you visit the FEMA website.
It is currently estimated that only 20% of American homes that are potentially at risk from floods are actually covered by flood insurance. This is probably because most homeowners believe that they are covered under their standard homeowner's insurance policy, and also because flood insurance is not offered by private insurers. However, you are now aware that this vital insurance is offered by the National Flood Insurance Program.