Flooding is categorized as the No. 1 natural
disaster in the United States, affecting every state. It can devastate entire
communities, destroying neighborhoods, displacing families and forcing
residents to pick up the pieces in Mother Nature’s wake. It’s no wonder that homeowners
question whether flood damage is included in their home insurance policy.
Everyone lives in an area susceptible to
flooding. While we may think coastal states, such as Louisiana, Florida and
California, are at the greatest risk of floods because of tropical storms and
hurricanes, the Federal Emergency Management Agency says that more than 20 percent
of all flood claims come from properties outside of high-risk flood zones. Flooding
can occur from heavy rains, melting snow, inadequate drainage systems and
failed protective devices like dams. And just one inch of water can cause
$25,000 worth of damage to your home.
With this risk in mind, here are 10 key things
every homeowner needs to know about flood insurance.
1. Standard Home Insurance Policies Don’t Cover Flooding
While water damage, such as that from a frozen
pipe, is typically included in your standard home insurance policy, this
doesn’t extend to flooding. Flooding coverage isn’t included in the majority of,
if not all, conventional home owners insurance policies and needs to be
In some cases, depending on where you live and
if your area is categorized as high-risk, your mortgage lender may require you
to buy flood insurance as a mandatory measure. Your lender doesn’t want you to
lose track of mortgage payments if you’re forced to empty your bank account to
cover major repairs from a flood.
And according to FEMA, under federal law,
flood insurance also is a must for any federal financial assistance to build in
any areas classified as special flood hazard areas.
2. The Federal Government Provides Flood Insurance
The federal government provides flood insurance via the National Flood Insurance Program (NFIP), which is run by FEMA. While flood insurance is underwritten and issued by the government, policies are sold through private insurance agents who act as a liaison between the NFIP and the homeowner. Keep in mind, not all insurance companies offer NFIP insurance, but FEMA provides a list to help you get started.
You can check if your area participates in the NFIP on FEMA’s FloodSmart.gov website, which includes a NFIP Community Status Book, listing flooding risk status reports by state and territory.
As long as your community is listed in one of
the 21,000 or so regions covered in the NFIP, you’re eligible for two types of
coverage — building property and personal (contents) property. And yes, it’s
wise to secure both types.
3. What the NFIP Covers
Building property coverage is like dwelling
insurance in a standard home policy, covering the physical structure of your
home and its foundation, from electrical and plumbing to furnaces, water
heaters and any built-in kitchen appliances.
Building property coverage insures you at your
home’s replacement cost value, not its market value, for up to $250,000. Should
flooding leave its mark on your home, this insurance will trigger and cover any
repairs up to the maximum amount you’re insured for.
Contents insurance comes separately, just like
in a standard home policy. It covers the inventory of your personal property
for up to $100,000, but factors in depreciation value. If you sunk $5,000 into
your home entertainment system 10 years ago and the system is destroyed in a
flood, your policy would pay you for what your tech would be worth today to
replace. Your clothes, furniture and everyday possessions are accounted for in
Flood insurance even provides $2,500 of
coverage for valuables like jewelry, furs and artwork.
4. Private Flood Insurance Is Available, Too
Some — but not many — insurance companies
offer private flood insurance, or excess flood protection, that isn’t backed by
the government and NFIP. It’s an avenue worth exploring if you need to top off your
policy with private insurance (for example, if you’re in a high-risk area and
your home is worth more than $250,000). Combining both policies could protect
you if the cost of repairs exceeds what’s covered in your NFIP policy so you
aren’t stranded and paying out of pocket for the difference.
There is a handful of other great features
that make private insurance useful, including extended coverage on your
dwellings and contents insurance, faster activation (sometimes as quickly as
within a week) and covering costs for short-term housing if you’re forced to
relocate. Private insurers also tend to process and file your claims faster.
Do your homework and some number crunching to
see if you need private insurance, and pull together some quotes from private
insurers. Depending on where you live, some private insurance will be backed by
the state through a guaranty fund. This is an extra layer of protection: If your
insurer closes shop, your state will pay the coverage promised to you.
The downside? Private flood insurance comes at
a much heftier cost than the NFIP, especially if you live in a high-risk area.
In some cases, some insurers won’t even cover certain regions due to the risk.
5. What Flood Insurance Does Not Include
Every policy comes with its fine print and
this applies to flood insurance too. Any damage caused by moisture, mildew or
mold that could have been avoided by the property owner or which is not
attributed to the flood won’t be covered by your flood insurance.
Damage caused by earth movement, even if the
earth movement is caused by flooding, is also exempt.
Additional living expenses, such as temporary
housing, while your repairs are being made will come out of your own pocket
under the standard NFIP policy, along with any property and belongings outside
of your insured building. This includes your deck, patio, fencing, seawalls,
hot tubs and swimming pools. It’s in these instances that extra insurance may
be worthwhile for some households.
6. What Flood Insurance Costs
Just like your conventional home insurance
policy, multiple factors are at play in calculating the cost of your flooding policy.
In this case, it includes your location and flood zone risk; the design, age
and type of structure of your home; and the amount and type of coverage you’re
Homes categorized as high-risk will command
more expensive policies — to the tune of about five times compared to regions
classified as low-risk. The government suggests that in high-risk areas, there is at least a one-in-four chance of flooding
during a 30-year mortgage.
And then there are factors like your
deductible — a higher deductible will lower the premium you pay.
Simple upgrades around the home, such as installing
flood boards and air brick covers to keep water out of the home, could reduce
your risk and your insurance costs.
You can also consider wet floodproofing by
constructing or rebuilding the part of your home within base flood elevation with
materials that are resistant to floodwaters. Dry floodproofing includes using
floodproof sealants and barriers, and adding a drainage system to divert water
away from the house.
7. Calculate Your Flood Risk
Misconceptions abound when it comes to
assessing flood risk. It’s not just homes in low-lying or coastal areas that
are at risk; homes on hills or inclines can be susceptible to flooding and
inland states are also vulnerable. Flood
insurance can pay regardless of whether there is a major hurricane that
warrants a presidential disaster declaration.
Flood history, rainfall, snowfall, topography,
wind velocity, tidal surge, flood control measures — these are all key factors
used by FEMA to measure flood risk.
The government notes that residents living in
and around areas affected by wildfires face an increased risk of flooding for several years post-wildfire. Flood Smart.gov
recommends that residents living in the western United States purchase flood insurance to protect against
devastating flooding and the mudflows that can follow.
You can check
where your neighborhood falls on the threshold as a flood zone — low-,
moderate- or high-risk — via the NFIP’s Flood Insurance Rate Map(FIRM).
The map outlines a community’s base flood
elevations, flood zones and floodplain boundaries. Have a close look at the
FIRM — or DFIRM, its digital version — to get a reliable indication of what
flood zone you’re in. Make sure to make this an annual habit because these maps
are constantly updated to match changes in geography, construction, weather and
flood management activity.
Have a look at FEMA’s Flood Map Service
Center and check your risk by putting in your address.
8. Wind-Driven Rain Is a Different Story, Though
Every insurance policy comes with a unique set
of caveats and exclusions. In this case, it’s wind-driven rain damage. FloodSmart.gov
notes that when rain enters through a wind-damaged window or door, or seeps in
through a hole in the wall or a roof, the NFIP considers the resulting water damage
to be windstorm-related and not flood-related.
Things get pretty technical here — FloodSmart.gov
says that flood insurance covers “overflow of inland or tidal waters and
unusual and rapid accumulation or runoff of surface waters from any source.”
But the flood must inundate two or more acres of normally dry land area or two
or more properties (one of them should be yours).
Flood insurance includes flood damage caused
by hurricanes, rivers and tidal waters as long as the floodwaters covers two
acres or two properties, but once wind and hail get involved, it’s your initial
homeowners insurance policy that’s put to work.
What caused the flood is important too. For
example, damage caused by a sewer backup is only covered by flood insurance if
it’s a result of flooding — damage isn’t covered if the sewer backup and
subsequent flooding is caused by some other issue.
9. Don’t Take Your Time — It Takes 30 Days to Kick In
Some homeowners may hold off on buying a flood
insurance policy, waiting for a rainy day — literally. This isn’t a clever
strategy to deploy, though, as in most instances, homeowners face a 30-day
waiting period before their policy goes into effect.
Instead of waiting until the rainy season
approaches to add a flood insurance policy, your safest bet is to do your
research and secure your policy while conditions are dry. This way, it’s
available to you and there is no debate about when your policy kicks in if you
need to make a claim.
10. Flood Insurance Has Paid Out a lot of Claims
FEMA notes that as of September 2019, 59
insurance companies participated in issuing NFIP policies. As of August 2019,
69 percent of policies covered single-family homes, 20 percent covered
condominiums and 5 percent covered businesses and non-residential properties.
Hurricane Katrina in 2005 still held the
highest number of NFIP payouts, as of March 2019, totalling at $16.3 billion. Hurricane
Harvey in 2017 ranked second, leading to $8.9 billion in NFIP payouts, followed
by Superstorm Sandy, in 2012, which resulted in $8.8 billion in payouts for
The average flood insurance
claim payment over the past five years has been about $69,000, according to
If you don’t have flood
insurance, the government can step in with federal disaster assistance but only
when there is a presidential disaster declaration — and most flood events don’t
culminate with this step.
Federal disaster aid is
typically a no-interest or low-interest disaster loan that must be repaid, leaving
you on the hook for the entire cost of your home’s repair post-flooding. These
loans usually aren’t more than $5,000 to $10,000, leaving you with very little
financial wiggle room to sort out repairs and a rebuild.
So, when it comes to protecting your home from
flooding, particularly if you live in a high-risk area, it might be wise to
give some serious thought to a flood insurance policy to give yourself some
peace of mind and to potentially save your pocketbook.