Flooding is a natural disaster that can impact nearly every part of the United States.
The Federal Emergency Management Agency (FEMA) reports that between 1996 and 2019, flooding occurred in 99% of U.S. counties. Flood damage is expensive; one inch of water can cost up to $25,000.
Therefore, homeowners must understand their risk and know what type of insurance coverage is available to protect their property.
In this guide, we will walk through the key aspects of flood insurance to help you understand the “ins and outs” and how to choose the right one.
Flood Risk and Homeowners Insurance
Contrary to popular belief, a standard homeowner policy doesn’t cover flood damage.
FEMA defines a flood as water covering at least two acres of normally dry land or two properties. Due to this definition, the damage caused by floodwaters is often excluded from traditional home insurance policies.
Therefore, it becomes crucial to opt for a separate flood coverage, especially if you are living in a flood-prone area.
Understanding Flood Insurance
Flood insurance, as the name suggests, is designed to cover damage caused by flooding. It can be obtained through private insurers or the National Flood Insurance Program (NFIP). In addition to your current home insurance policy, some insurance companies also provide flood insurance.
In the event of a flood, this extra coverage can offer financial security and peace of mind.
Water Damage Covered by Home Insurance
Although flood damage is not covered by standard home insurance policies, other forms of water damage might be, depending on the specifics of the policy and any additional endorsements you may have added.
Coverage often includes damage caused by the weight of ice, snow, or sleet, as well as damage from windstorms, freezing and burst pipes, and accidental overflow from household systems. Different types of home insurance policies typically cover these kinds of damages.
Homeowners should be aware of the two primary categories of home insurance policies: HO-3 and HO-5 policies. Special “named perils,” or the specific causes of loss specified in the policy, are the only ones covered by HO-3 policies.
In contrast, HO-5 policies offer “open perils” coverage, meaning that everything is covered unless it is specifically excluded from the policy. While HO-5 policies offer broader protection, flooding is still a common exclusion, necessitating separate flood insurance.
Water Damage Not Covered by Home Insurance
Apart from flooding, other types of water damage, such as sewer backups, mudslides, mudflows, and landslides, are also not typically covered under standard home insurance policies.
However, sewer backup coverage can often be added to your policy as an endorsement. If you live in an area prone to these risks, it’s worth considering additional coverage options that specifically address these potential hazards.
Who Needs Flood Insurance?
Considering that the whole nation is susceptible to flooding, most homeowners should consider buying flood insurance. If you live in a high-risk flood zone and have a mortgage, you will likely be required to have a flood insurance policy.
However, even if your home is located in a lower-risk area, flood insurance can still be a good investment.
Homes in coastal regions, those near bodies of water, and properties in low-lying areas are particularly vulnerable to flooding, but heavy rains can lead to floods even in higher-elevation areas.
Tips for Purchasing Flood Insurance
There are a few things you can do to streamline the process if you choose to buy flood insurance. First, find out if your present insurance company facilitates NFIP policies or offers flood insurance.
It’s important to know your coverage needs, as flood insurance covers both the dwelling and personal property. However, you cannot purchase a personal property-only policy. Working with an insurance agent can help you determine the appropriate coverage for your situation.
Shopping around for flood insurance is also a good idea, as some insurers now offer their policies beyond NFIP.
It is possible to get the best offer by comparing rates. The majority of flood insurance policies have a 30-day waiting period before they go into effect, so be mindful of them. Consequently, it’s critical to prepare ahead of time and buy coverage before a storm approaches.
Additionally, most flood insurance policies need to be paid in full, although payment through your mortgage escrow account may be an option.
Conclusion
Understanding the coverage for flood-damaged homes is essential for protecting your property from potential disasters.
By recognizing the limitations of standard homeowners insurance and investing in flood insurance, you can safeguard your home and finances from the devastating effects of flooding.
Understanding your options for flood insurance can offer essential protection and peace of mind, regardless of whether you live in a high-risk location or just want to be prepared. Want to know more about flood insurance or how to choose the right one? Get in touch with our property insurance experts now!
