Flood insurance is designed to protect a home and your personal belongings from losses caused by water damage. Specifically, this coverage is for flooding and flood-related erosion that’s caused by events such as melting snow, coastal storm surges, a blocked storm drainage system, levee dam failure, or heavy or extended rain.
Policies for flood insurance are available for both residential and commercial properties. The National Flood Insurance Program (NFIP) is managed by the Federal Emergency Management Agency (FEMA). Approved insurance providers deliver flood insurance policies. Flooding makes up 90 percent of all US presidents’ declared natural disasters. The chance of experiencing a flood is over six times more likely than a fire over the life of a 30-year mortgage.
How Flood Insurance Works
A flood insurance policy is not found in a homeowner’s insurance policy. Many homeowners are not aware that their home is not covered for flooding. A standard homeowner’s insurance policy typically includes interior water damage due to events like a burst pipe. But the damage or destruction caused by floodwaters is not covered in a standard homeowner’s insurance policy.
Homebuyers who are applying for a federally backed mortgage loan for a home that is in a federally designated flood zone are typically required to add flood insurance coverage to their policy. Federally backed mortgage loans include the Federal Housing Administration (FHA), Veterans Affairs (VA) and the United States Department of Agriculture (USDA) loans. If you are seeking a home that is in a high-risk area for flooding, you will need to obtain flood insurance.
Flood insurance works similarly to how other insurance products do. A homeowner will pay an annual premium. This amount is calculated based on the level of flood risk present in your area and the deductible you choose.
If a flooding event occurs that inflicts damage or destroys property or its contents, a claim can be submitted. The monetary compensation provided will help the homeowner make the necessary repairs or rebuild. There is a policy limit that is set on the amount of money that can be received.
Acts As A Type Of Property Insurance
Flood insurance can be required by a mortgage lender or the federal government (when the home loan is federally backed), if you live in an area indicated in a flood map to be high risk for flooding. It is a type of property insurance that is separate from standard policies like a standard homeowner’s insurance policy.
Homeowners, renters, and business owners seeking a flood insurance policy can purchase one through a local insurance agent. The policy can protect the home, personal belongings, or both. According to FEMA, all 50 states have experienced flooding. $25,000 of damage can be caused by just one inch of water in a home. This makes the case to consider an insurance policy regardless of whether a property is in a flood zone.
Protects Against Losses Due to Water Damage
The direct physical losses that are a result of a flood, losses related to currents of water or waves above regular cyclical levels, and accompanying flash floods, severe storms, etc., that result in flooding are all covered by flood insurance. The building/dwelling is covered for the replacement cost for the resulting flood damages. Coverage for personal belongings is available through a separate policy. Homeowners and business owners can choose whether to get both protections or not.
Dependent Upon Locality
FEMA keeps updated flood maps that are available online for homeowners and business owners to see what their risk is for flooding in their area. Due to land development, erosion, and weather patterns, the risk of a flood can change over time. There is some level of flood risk for everyone. Even if you are in low-risk to moderate-risk flood areas, keep in mind that 20 percent of NFIP claims are from these areas. Flood insurance is your best defense against the risk of flood.
What Are The Different Types Of Flood Insurance?
While there are several factors that may impact insurance coverage, there are two primary types of flood insurance — building property coverage and personal contents coverage. Each option serves different purposes and has different coverage limits. Here are the basics of these two types of flood insurance coverage:
Building Property Coverage
- This includes coverage for the physical structure and foundation of a home, electrical and plumbing systems, attached cabinets, paneling, and attached bookcases, central air and heating systems, and detached garage (a separate policy is required to cover other detached structures).
- $250,000 maximum coverage limit that typically pays out as based on replacement costs (cost of repairing the home in current dollars) for the primary residence.
Personal Contents Coverage
- Includes coverage for furniture, electronics, clothing, certain portable appliances, freezers (including the food inside of them), curtains, and some values such as art up to a certain amount.
- A $100,000 maximum coverage limit typically pays out on an actual cash value basis (factors in depreciation).
Work With The Flood Insurance Experts
To protect your home from the potential risks of flooding, you must rely on the experts. Professional insurance brokers understand the need for flood insurance, especially in specific areas, and will work with you to provide the best coverage possible. Reach out to Merchant Family Agency to learn about how to get the coverage that provides peace of mind.