Did you know that flooding is the most common natural disaster in the United States? Hurricanes, storm surges, water channel overflows, and other extreme situations can quickly lead to rising water emergencies. While some regions are much more prone to flooding than others, every home carries at least some risk.
Losing your home and your belongings to flooding can be completely devastating. If you become the victim of a flood, you may find yourself displaced from your home and on the hook for thousands of dollars in repairs. One’s standard homeowners insurance policy does not cover flood damage. Anyone living in a high-risk area should protect themselves with a flood policy. Even if your home’s risk of flooding is very low, flood insurance can be a valuable safeguard.
What Is Flood Insurance?
Flood insurance is financial coverage for damage caused to your home or belongings by flooding. Most types of flood damage are not covered by your traditional homeowners insurance policy. Your homeowners insurance might cover water damage from a burst pipe, but it doesn’t cover losses from rising water from storms, a dam failure, or other major events. Therefore, it’s necessary to purchase a separate flood insurance policy in addition to their homeowners policy.
Flood insurance is most commonly purchased from the National Flood Insurance Program (NFIP). The NFIP partners with major insurance companies to provide flood coverage for homeowners, business owners, and renters. All of the companies partnering with the NFIP offer the same coverage and determine rates in the same way, so there typically isn’t a need to shop around for better rates. However, some private companies also offer flood insurance policies that may have higher coverage limits or different coverage terms.
What Does Flood Insurance Cover?
There are two components to a flood insurance policy: building coverage and contents coverage. Unlike a traditional homeowners insurance policy, when buying flood insurance, you must purchase building and contents coverage separately. Building coverage protects the home itself as well as the plumbing, electrical, and other major systems. It also usually covers appliances like your water heater, refrigerator, and dishwasher. Contents coverage protects your personal items, such as furniture, clothing, and electronics.
For NFIP policies, the maximum coverage for building damage is $250,000, and the maximum coverage for contents is $100,000. Private policies may offer higher coverage limits, but you’ll face higher premiums and deductibles.
What Doesn’t Flood Insurance Cover?
Flood insurance offers fairly broad coverage, but it doesn’t cover everything. Certain types of flooding, such as flooding from a sewer backup, may not be covered by your policy. Your policy will not cover damage to your car, but your auto insurance policy that carries “comprehension coverage” should cover flood damage.
Flood policies only cover the home itself and its contents. Your policy won’t cover damage to a pool, patio, septic system, or other structures separate from your home.
While most traditional homeowners policies offer loss of use coverage, flood policies typically do not. This means that your policy will not cover a hotel stay if you have to vacate your home while it’s being repaired or rebuilt.
Flood Insurance Cost
On average, a flood insurance policy can range from a few hundred dollars to a few thousand dollars. The key determining factor is the risk of flooding in your location. FEMA creates flood zone maps that indicate the likelihood of flooding in every region throughout the United States.
Your location on these maps will determine your insurance premiums and deductibles.
Factors that are specific to your property can make a difference, too. For example, if your home is on a hill, your premium may be lower. If your home is newly built, it probably has extra safeguards against flooding, which can result in lower premiums.
Should You Purchase Flood Insurance?
In some regions of the United States, purchasing flood insurance is essential. If you live in a flood zone, your mortgage lender may require you to obtain flood insurance before they approve your home loan. If you’ve previously received federal disaster assistance for flood damage, you need to have flood insurance to be considered for future aid.
Even if no one requires you to purchase flood insurance, you should always have a flood policy if you live in a flood zone. One inch of water can result in $25,000 in damage. Flooding is incredibly unpredictable, and devastating storms are becoming increasingly common due to climate change. Carrying a flood policy is one of the best things you can do to protect yourself financially.
If you don’t live in a flood zone, it may be more difficult to decide whether or not to purchase flood insurance. However, premiums are fairly inexpensive, especially for those who live in low-risk areas. If you can afford the policy, it could be a great way to get extra protection and put your mind at ease. About 20% of flood insurance claims occur outside of high-risk areas. Without an insurance policy, you may have to apply for a FEMA grant or a federal disaster assistance loan in the event of a flood, both of which provide limited coverage.
Flood insurance is absolutely essential in some regions of the country, but it’s a wise investment no matter where you live. Your standard homeowners insurance policy doesn’t cover most forms of water damage. With a separate flood policy, you can protect your house and your belongings. You never know when disaster will strike, so you should start researching your coverage options as soon as possible.