How Does Flood Insurance Work?
Flood insurance covers your property in the event of a flood. A flood is defined as an inundation of water on normally dry land. In order to make a flood insurance claim, the damage needs to result from floodwaters.
Most flood insurance policies are backed by the federal government through the National Flood Insurance Program ( NFIP ), an arm of the Federal Emergency Management Agency ( FEMA ). You must purchase NFIP policies through a local insurance provider.
The coverage limits for NFIP flood insurance policies are:
$250,000 for building coverage
$100,000 for contents coverage
If the cost of replacing your property exceeds those limits, you should buy additional coverage through a private flood insurance company. Private insurers can also offer special riders to cover flood insurance exclusions.
The average cost for a flood insurance premium is between $850 and $1,200 annually, depending on where you live and the value of your property. You should also know that when you purchase your policy, you’ll be subject to a 30-day waiting period unless you’re initially purchasing your home or your home’s flood zone has been changed.
Do I Need Flood Insurance?
If you live in a high-risk flood zone called a Special Flood Hazard Area (SFHA) and you have a mortgage on your home, flood insurance is mandatory. If your home is in a moderate-risk area, your mortgage lender may or may not require you to carry a flood policy. But it’s still a great idea to carry one.
That’s because flood damage is particularly expensive. Even a few inches of water can cost more than $20,000 in property damage to a 2,000-square-foot home.
Unsure about your flood risk? Visit FloodSmart.gov to review the flood maps in your area.
What Flood Insurance Covers
Flood insurance comes in two parts. The first is mandatory and known as building coverage. It covers your home’s structure and things associated with it:
Foundations and anchorage systems
Detached garages
Well-water tanks and pumps
Sump pumps
Roofs and solar systems
Staircases
Electric and plumbing systems
Fuel tanks
Water heaters
Permanent air conditioners
Built-in bookcases, paneling, and cabinets
Permanent carpeting
The second form of coverage is optional and known as contents coverage. It covers your personal property, including:
Artwork, electronics, and furniture
Clothing, jewelry, and furs
Microwave oven, washer, and dryer
Portable air conditioners
Non-permanent carpeting
What Flood Insurance Doesn’t Cover
Flood insurance comes with policy limits. And it typically excludes the following unless you purchase a special rider:
Currency and precious metals
Stock certificates and valuable papers
Cars, trucks, and other vehicles
Landscaping and fencing
Patios and decks
Swimming pools and hot tubs
Seawalls
Septic systems
Additional living expenses (ALE)
Business losses caused by flooding
Additional living expenses include temporary housing and other expenses associated with having to live outside your home.
Your flood policy also doesn’t cover damage that was avoidable. For example, you leave a window open during a storm and your floors are damaged. And water damage that’s caused by anything other than a flood is not covered.
That would most likely be covered under a standard homeowners insurance policy.
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