Is your home protected from a flood?
By Laura Sherman, CAPI, CPRM, Founding Partner
Do not let your dreams get washed away in the event of a flood. Unbeknownst to most, everyone in the United States lives in a potential flood zone. And homeowners insurance does not typically cover flooding. FEMA statistics show that flooding is the number one natural disaster in the United States. So what do you need to know?
Not long ago, flood insurance was unavailable because it was too costly for private insurers to offer. The national response to flood disasters was generally flood control dams, levees and sea walls, and disaster relief. Then, in 1968, Congress established the National Flood Insurance Program (NFIP) to give property owners the opportunity to purchase flood insurance and to encourage communities to implement measures to reduce risks in Special Flood Hazard Areas (SFHAs). Today, individuals in these communities may purchase federal flood insurance.
What is a flood?
The NFIP requires that a flood inundate at least two acres and multiple properties, one of which is the insured property. “Flood” is a general and temporary partial or complete inundation of normally dry land from the overflow of inland or tidal waters, an earthquake, the unusual and rapid accumulation or runoff of surface waters or mudflows caused by flooding.
The fact that a flood has not occurred recently does not mean one will not happen in the future. Flood history is just one element used in determining flood risk. Other factors include your community’s rainfall and river flow data, topography, wind velocity and building development.
Flood Insurance 101
Unlike homeowners insurance, flood insurance is not meant to restore your home to its original condition, but rather to get you back on your feet. It is important to understand the coverage the NFIP offers, before a flood strikes:
The NFIP primary flood policy affords up to $250,000 dwelling coverage and $100,000 contents coverage. You may also purchase excess flood coverage up to your dwelling limit through private insurers.
Surprisingly, 25 to 30 percent of floods occur in a moderate-to-low risk area, or “preferred flood zone.” For those in this type of zone, the cost of a primary flood policy is affordable, at $412 annually.
Claim Settlement Basis
If you purchase the maximum limits with the NFIP flood policy, the building coverage on principal residences is paid on a replacement cost basis, and for non-principal residences, on an actual cash value basis. Contents coverage is always paid on actual cash value.
Building Code Coverage
The NFIP flood policy pays up to $30,000 to meet local, state and federal flood requirements that may be imposed. However, there is no coverage for updated electrical wiring, plumbing or roofing.
Additional Living Expenses
The NFIP flood policy does not cover the cost of temporary housing, meals or other needs when a home becomes unlivable from flooding. Some excess flood policies, if purchased, do cover additional living expenses.
The NFIP flood policy covers up to $2,500 for fine art, collectibles, furs, business property and jewelry categories combined, but not silverware. A private collections policy will properly protect treasured possessions.
A separate flood policy is needed for a barn, pool house or guest home. Structures like docks, fences, retaining walls and swimming pools are excluded.
Elevated Buildings and Basements
Flood insurance is limited in areas below the lowest elevated floor, i.e. the policy does not cover finished walls, floors, ceilings or personal belongings. However, it does cover structural elements and essential equipment like sump pumps, furnaces, washing machines and freezers.
With the unprecedented flooding in recent years, it is important to have protection. Because of a typical 30-day waiting period before a new flood policy goes into effect, do not wait until a hurricane is headed your way.