Flood Insurance

Did you know that your homeowners insurance does not cover flood damage? Insurance against flood must be obtained separately. A flood insurance policy also reimburses you for the work that you and other family members did to sandbag your homes, move furniture and remove debris.

The Federal Emergency Management Agency’s (FEMA) maps are important when it comes to flood insurance because if they show that your home sits in a 100-year flood plain, you must buy federal flood insurance in order to get a mortgage. If you live outside a high-risk zone, or if you no longer have a mortgage, flood insurance is optional.

Flood Insurance Q&A’s….

When is flood insurance required? 

Under federal law, the purchase of flood insurance is mandatory for all federal or federally related financial assistance for the acquisition and/or construction of buildings in high-risk flood areas (Special Flood Hazard Areas or SFHAs).

The amount of flood insurance coverage required by the Flood Disaster Protection Act of 1973, as amended by the National Flood Insurance Reform Act of 1994, is the lesser of the following:

1. The maximum amount of NFIP coverage available for the particular property type,
2. The outstanding principal balance of the loan, or
3. The insurable value of the structure.

If the property is not in a high-risk area, but instead in a moderate-to-low risk area, federal law does not require flood insurance; however, a lender can still require it. In fact, over 20-percent of all flood insurance claims come from areas outside of mapped high-risk flood zones. Note that if during the life of the loan the maps are revised and the property is now in the high-risk area, your lender will notify you that you must purchase flood insurance.

Doesn’t my homeowners insurance policy cover damage caused by a flood?

No.  Homeowners insurance policies generally do not cover damage caused by flood.  Flood is a common exclusion found in most homeowners insurance policies. 

What does flood insurance cover?

A flood insurance policy will cover physical damage to the structure of your home caused by a flood.  Specifically, flood insurance will cover the following items:

• The insured building and its foundation
• Electrical and plumbing systems
• Central air conditioning equipment, furnaces and water heaters
• Refrigerators, cooking stoves and built-in appliances such as dishwashers
• Permanently installed carpeting over unfinished flooring
• Permanently installed paneling, wallboard, bookcases and cabinets
• Window blinds
• Detached garages (up to 10 percent of building property coverage); detached buildings (other than garages) require a separate building property policy
• Debris removal

What about my personal property – is it covered by flood insurance?

Coverage for personal property (contents) can be purchased as part of a flood insurance policy.  It is important to discuss this with your agent to ensure you are getting the coverage you desire.  Coverage can be secured for personal property (contents) including the following:

• Personal belongings, such as clothing, furniture and electronic equipment
• Curtains
• Portable and window air conditioners
• Portable microwave ovens and portable dishwashers
• Carpets that are not included in building coverage
• Clothing washers and dryers
• Food freezers and the food in them
• Certain valuable items such as original artwork and furs (up to $2,500)

Why do I need flood insurance if my community has never been flooded? 

Flooding occurs in moderate-to-low risk areas as well as in high-risk areas. Poor drainage systems, rapid accumulation of rainfall, snowmelt, and broken water mains can all result in flood.  Properties on a hillside can be damaged by mudflow, a covered peril under the Standard Flood Insurance Policy.  In high-risk areas, there is at least a 1 in 4 chance of flooding during a 30-year mortgage.  For these reasons, flood insurance is required by law for buildings in high-risk flood areas as a condition of receiving a mortgage from a federally regulated or insured lender.

How expensive is flood insurance?

In 2014 the average flood insurance policy cost just under $700.  Of course, the price of flood insurance is largely dependent on where a home is located, the amount of coverage purchased, the deductible selected, etc. 

Flood insurance & Basements:

Flood Insurance coverage is limited for basements regardless of zone or date of construction. It’s also limited in areas below the lowest elevated floor, depending on the flood zone and date of construction. These areas include:

• Basements
• Crawl spaces under an elevated building
• Enclosed areas beneath buildings elevated on full-story foundation walls that are sometimes referred to as “walkout basements”
• Enclosed areas under other types of elevated buildings

***Note***Household items such as a furnace & hot water heater will usually be covered by most flood insurance policies (despite the fact that these items are commonly located in basements). 

Make sure to ask your agent for additional details on your basement coverage.

What is not covered by flood insurance?

• Damage caused by moisture, mildew or mold that could have been avoided by the property owner
• Currency, precious metals and valuable papers such as stock certificates
• Property and belongings outside of an insured building such as trees, plants, wells, septic systems, walks, decks, patios, fences, seawalls, hot tubs and swimming pools
• Living expenses such as temporary housing
• Financial losses caused by business interruption or loss of use of insured property
• Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your policy)

What is the difference between flood and water damage?

A standard flood insurance policy, underwritten by the National Flood Insurance Program, provides coverage for damage caused by a flood. Flood is defined as an overflowing of water onto land that is normally dry. Generally speaking, if the water touched the ground before it entered your home or building, it is considered flood damage. Flood damage is NOT covered by your Commercial Property or Homeowners insurance policy. Examples of flood damage include:

• A nearby river overflows its banks and washes into your home or building
• A heavy rain seeps into your home or building because the soil can’t absorb the water quickly enough.
• A heavy rain or flash flood causes the hill behind you to collapse into a mudslide that oozes into your home or building.
• A water or sewer main breaks causing flooding
• A swimming pool collapses and the water flows into your home or building
• Overflow of inland or tidal waters

Is there a waiting period before coverage begins?

Typically, there is a 30-day waiting period from date of purchase before your policy goes into effect.  Here are the only exceptions:

• If flood insurance is being purchased in connection with the making, increasing, extending or renewing of your loan.
• If a building has been newly designated in the SFHA and flood insurance is being purchased within the 13-month period following a map revision.
• If flood insurance is required as a result of a lender determining that a loan that does not have flood insurance coverage should be protected by flood insurance.
• If an additional amount of insurance is selected as an option on the renewal bill.
• If a property is affected by flooding on burned Federal land that is a result of, or is exacerbated by, post-wildfire conditions when the policy is purchased within 60 days of the fire containment date.

Can I purchase flood insurance if I do not own a home?

Yes – if you are renting the place you reside you can absolutely purchase flood insurance.  In this case the flood insurance would be purchased primarily to protect your personal possessions.  Likewise, if you rent or own a condo – you can purchase flood insurance as well. 

Flood facts….

• From 2010 – 2014 the average residential flood claim amounted to more than $39,000.
• In the past 5 years, all 50 states have experienced floods or flash floods.
• Everyone lives in a flood zone. (For more information, visit Flood Zones FAQs.)
• Homeowners’ insurance does not cover flood damage.
• If you live in a Special Flood Hazard Area (SFHA) or high-risk area and have a Federally backed mortgage, your mortgage lender requires you to have flood insurance. (To find your flood risk, fill out the Flood Risk Profile.)
• Just a few inches of water from a flood can cause tens of thousands of dollars in damage.
• Flash floods often bring walls of water 10 to 15 feet high.
• A car can easily be carried away by just two feet of rushing water.
• Hurricanes, winter storms and snowmelt are common (but often overlooked) causes of flooding.
• New land development can increase flood risk, especially if the construction changes natural runoff paths.
• Federal disaster assistance is usually a loan that must be paid back with interest. For a $50,000 loan at 4% interest, your monthly payment would be around $240 a month ($2,880 a year) for 30 years. Compare that to a $100,000 flood insurance premium, which is about $400 a year ($33 a month).
• A Preferred Risk Policy provides both building and contents coverage for properties in moderate- to low-risk areas for one low-price.
• You are eligible to purchase flood insurance as long as your community participates in the National Flood Insurance Program. Check the Community Status Book to see if your community is already an NFIP partner.
• In most cases, it takes 30 days after purchase for a policy to take effect, so it’s important to buy insurance before the storm approaches and the floodwaters start to rise.
• In a high-risk area, your home is more likely to be damaged by flood than by fire.
• Even though flood insurance isn’t federally required, anyone can be financially vulnerable to floods. In fact, people outside of mapped high-risk flood areas file over 20-percent of all National Flood Insurance Program flood insurance claims and receive one-third of Federal Disaster Assistance for flooding.
• From 2005 to 2014, total flood insurance claims averaged more than $3.5 billion per year.
• When your community participates in the Community Rating System (CRS), you can qualify for an insurance premium reduction discount of up to 45% if you live in a high-risk area and up to 10% in moderate- to low-risk areas.
• Since 1978, The NFIP has paid nearly $50 billion for flood insurance claims and related costs (as of 2/17/15).
• There are currently more than 5.3 million flood policies in force across more than 22,000 communities in the U.S.
• The two most common reimbursement methods for flood claims are: Replacement Cost Value (RCV) and Actual Cash Value (ACV). The RCV is the cost to replace damaged property. It is reimbursable to owners of single-family, primary residences insured to at least 80% of the building’s replacement cost.

For more policy and claim statistics, visit the National Flood Insurance Program.