Who needs flood insurance?

If you have a home and a homeowners insurance policy, chances are high that you have been told about flood insurance.

This is mostly due to the fact that flood insurance, as well as some other types of specific coverage plans like earthquake insurance, is separate from the more common homeowners insurance policies. While homeowners insurance covers quite a lot of standard perils to a home, such as fire, tornados and theft, it explicitly does not cover floods. Therefore, homeowners are forced to make the decision about whether or not flood insurance is right for their needs. Determining your own answer to that question is a complex process, but you can do so once you have the right information to weigh.

What Flood Insurance Covers

While flood insurance may seem like a simple concept, there is much more to it than meets the eye. Many people may live under the assumption that they do not need flood insurance, because they do not live in a high-risk area where it often floods. However, flood insurance is actually a safe option for anyone who would like to protect the value of their property in an emergency. Therefore, if you would like to see if flood insurance is going to be a solid investment for your home, it is helpful to learn what you can cover with it.

The basic purposes of flood insurance are that it covers the physical structure of your property, as well as your possessions inside the home. However, both of these categories are only covered up to a certain amount, and both have different deductibles. These deductibles are amounts of money that you have to pay out-of-pocket before gaining access to flood insurance funds in order to cover the rest of your damages. So if your home is completely ruined by a massive flood, you may have to pay small, yet varying amounts on your foundation and furniture before your insurance can cover the rest. But without flood insurance, you would likely have to pay for the entire cost of your damages.

Among the structural aspects of your home that are covered under flood insurance are your foundation, electrical/ventilation/plumbing systems, installed carpeting, built-in appliances, cabinets and water heater. Other buildings on your property, such as a garage or shed, can be included in this category, but their replacement value is subtracted from your home’s overall damage cost. The possessions in your home, however, cover the items that are easily removable from within it. These include your furniture, smaller installed appliances, smaller carpeting, clothing, electronics and more. Certain categories of personal items, such as art and other expensive belongings, are covered only up to a certain limit, usually set at a few thousand dollars. Therefore, it is highly recommended to keep valuable or easily water-damaged possessions in a safe place, even if you are under good flood insurance coverage.

What Flood Insurance Does Not Cover

Of course, there are also plenty of things that flood insurance does not cover. These include:

  • Anything that is deemed “preventable” by the homeowner: This often refers to pre-existing home conditions, such as mold and mildew. This is because although they can be worsened by a flood, these issues generally start due to unsuitable conditions that existed before.
  • Non-house property: This includes the land that your home is sitting on, as well as the outdoor property that you own, such as fences, patios, gardens, pools and even cars. All of these features usually fall under either homeowners or auto insurance, but are not listed under flood insurance.
  • Certain valuable items: While there are the aforementioned coverages for artworks and related possessions, other valuable things such as cash, jewelry, stock and bonds are not coverable.
  • Anything that is kept in an underground basement: Unfortunately, this refers to all basement rooms, and everything within them such as furniture, appliances and personal belongings. Certain things in a basement may be covered by other policies, but flood insurance does not usually provide exceptions for these areas.

Additionally, flood insurance will often exclude covering the temporary housing costs that you may need to endure when you are displaced by a flood. Your homeowners insurance may provide coverage if this occurs, but it is usually best to contact your insurance agent directly to make sure.

Where can you get flood insurance?

If you have determined that flood insurance is the right decision for your needs, or you simply want to check your available pricing options, there are a few different routes that you can take. First, the majority of flood insurance is distributed out of the National Flood Insurance Program (NFIP), which is operated out of the Federal Emergency Management Agency (FEMA). This federal program works with many different insurers to not only provide coverage plans for individuals and businesses, but also to create flood planning regulations that are enforced all around the country. Additionally, you can buy separate flood insurance from a private insurance company. You will always purchase flood insurance through your normal private insurance agent, but it generally varies whether or not they are selling their own company’s insurance or serving as a retailer for FEMA’s insurance.

If you receive flood insurance through the NFIP, there are few things to keep in mind. First, it is important to remember that there are definitive maximum coverage limits for all flood insurance policies. While these maximum coverage figures are generally high, they may not cover all of your damages, requiring you to pay the remainder of your costs out-of-pocket. Next, you should be aware of how your home rebuilding process is defined. Your replacement cost, or the overall value of your home’s structure, is not too terribly difficult to figure out. It is comprised of the base costs that it will take to rebuild your home’s structure, as it was before it was damaged or destroyed. However, your possessions are not quite so simple to categorize. They are covered up to their actual cash value, which is a term that the NFIP determined is the worth of your destroyed items as they were at the time of the flood. Thus, if any of your items were older and irreplaceable, or had depreciated in value, you may have to pay more money than you might first think in order to replace them. While these costs are established professionally by your insurance company’s assessors after you have already filed a claim, it can often be helpful to do some of these calculations yourself in order to be more aware of where all of the assessor’s figures are coming from.

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