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What You Should Know About Flood Insurance

young couple holding buckets under a leaking ceiling
Even if flood insurance isn't required, you may want to consider it.

Whether you live in a flood zone or not, it’s important to know if you should consider flood insurance and understand the types of flood insurance.

Most people think they only need flood insurance if they live near a river, but technically, we all live in a flood zone. Flood waters can affect any homeowner, any time. Flooding can occur with heavy rain or runoff, excessive snowmelt or even a broken fire hydrant. Homeowners’ insurance does not cover property damage from a flood of any kind. It only covers sudden or accidental water damage caused by broken pipes or appliances within the home, but those incidents should not be confused with flooding. A stand-alone flood insurance policy is the only coverage that will protect you from externally caused flood damage.

According to FEMA and the National Flood Insurance Program, the risk of flooding is one in four properties, compared to the risk of fire at one in 308. And the damage caused by floods is not minimal. One inch of water can cause up to $25,000 in damage. In 2019, the average flood claim paid was $52,000. Yet only 12% of property owners in the U.S. carry flood insurance.


Required flood insurance

Homeowners in a 100-year flood zone are required by mortgage lenders to carry flood insurance. Flood zone maps are updated on a regular basis as weather patterns and river basins change and development causes waterways and drainages to shift. As maps are updated, lenders may require homeowners to purchase flood insurance even if it wasn’t required at the time the home was built or purchased. Lenders do a good job of informing their clients when maps change, but if you don’t have a lender, it’s important to stay informed of changes in flood zones in your area and add flood insurance to your coverages. You can check with your county regarding official flood zone mapping.

And even if you don’t live in a 100-year flood zone, flood insurance should still be considered.


Flood insurance: public vs. private

There are generally two types of flood insurance: government-supported flood insurance and private. The National Flood Insurance Program is insurance offered through the federal government and managed by FEMA. NFIP insurance is available to anyone living in a high-risk or low to moderate-to-low-risk area and offers up to $250,000 in building coverage and $100,000 in contents coverage. Personal property is covered on an actual cash value (ACV) basis, not replacement value. You can purchase excess coverage, which covers properties valued above those limits. Under NFIP, each building covered goes on a separate policy. NFIP covers electrical, plumbing systems, furnaces, water heaters, permanently installed carpets, blinds, built-in appliances, permanently installed cabinets and bookcases. It does not cover additional living expenses, personal property in basements, landscaping, wells or septic tanks, fences, pools or business interruption. NFIP has a 30-day waiting period unless coverage is required by your lender.

Due to its limitations, NFIP may not fully insure your property and personal contents. The underwriting requirements on private flood insurance policies are often more comprehensive, less stringent and easier to write. Private insurance has fewer restrictions and coverage is not limited to $250,000. Also, some private insurers do not require elevation certificates, a typical NFIP requirement in high-risk areas. Private policy options also offer replacement value of personal property, additional living expenses and the ability to put multiple buildings on the same policy. They also have little or no waiting period.


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This content is for informational purposes only.  Consult your actual insurance policy for details regarding terms, conditions, coverage, and exclusions.

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