By Patricia L. Garcia
When you buy a new home, you’ll become very familiar with homeowners insurance and other types of coverage. But, one type of coverage that you may still be confused about is flood insurance. Here’s what you need to know about flood insurance and if it’s the right type of coverage to protect your new home:
Flooding Occurs in Every U.S. State
It doesn’t matter if you live in the desert or on the coast, flooding can affect your new home. “In high-risk areas, there is at least a one in four chance of flooding during a 30-year mortgage,” says Chrissy Nigro, a licensed insurance agent with Nigro Insurance Agency in Philadelphia, Pa.
According to Floodsmart.gov, the official site of the National Flood Insurance Program (NFIP), nearly 20 percent of flood insurance claims come from moderate-to-low risk areas.
While flooding is the most common natural disaster, you can also be affected by flooding caused by unnatural events, like leaks in the basement, but more on that later.
What Is Flood Insurance?
It’s important to note that standard homeowners’ insurance policies — even “all perils” policies — do not cover flooding or other natural events such as earthquakes or landslides. Flood insurance is a supplement to standard policies.
“Supplementary to a homeowner’s policy, flood insurance is extra coverage … expressly for the protection of your property and belongings should your home be damaged by flooding,” says Kim Clark, owner of Bayside Realty Consultants in Cape Cod, Mass.
While overseen by the National Flood Insurance Program, you can’t purchase the coverage directly from the program — flood insurance must be purchased through an agent.
Bob Freitag, owner and founder of AmeriClaims, Inc., in Indian Trail, N.C., reminds homeowners to understand the limits of flood insurance. “It covers direct physical damage only to building and personal property,” he says. “It does not cover moisture, mildew or mold; currency; precious metals; property and belongings outside of a building; most self-propelled vehicles such as cars and their parts; additional living expense or business interruption claims.”
Who Must Purchase Flood Insurance?
The Federal Emergency Management Agency (FEMA) periodically reviews watersheds to develop or update flood maps. These maps set minimum floodplain standards. Homeowners will be notified of a determination that their home is located in a flood plain. Homeowners can request that FEMA consider changing the map by submitting a Letter of Map Change.
These maps play an important part in whether you will have to purchase flood insurance. “If you have a mortgage … and you live in a flood plain, your lender will require flood insurance,” Freitag says. “Other than this, it is strictly voluntary to purchase flood insurance.”
Nigro explains that those whose lenders are federally regulated are equally affected. “When FEMA releases new flood zone maps and your house falls within these zones, it does affect homeowners and homebuyers,” she says. “Homes and buildings in high-risk flood areas with mortgages from federally regulated or insured lenders are required to have flood insurance. A lender can require flood insurance, even if it is not federally mandated.”
What else should I know about flood insurance?
Freitag says that flood insurance is limited in basements, crawl spaces and areas under elevated buildings and depends on the flood zone the property is in, as well as the date of construction. He adds that regardless of zone or date of construction, basements have limited coverage.
If you ever do need to file a flood claim, be sure to do so within 60 days, he says, unless FEMA authorizes an extension. “Failure to file on time could result in your claim not being paid,” Freitag says.
Disaster precautions taken now can prevent disruptions to repairing your home should it be damaged in the future, so be sure to speak to an agent to determine if flood insurance — or any other supplementary insurance — is the right coverage to protect your new home.