With the catastrophic rain event and flooding in Texas due to Hurricane Harvey, many people across the country are asking questions about their homeowners insurance and if they also need flood insurance. The National Flood Insurance Program (NFIP) was created by the US government in 1968. The goal of the plan was to help property owners better protect themselves against damages caused by flooding, which the standard homeowners insurance policy specifically excludes.
It doesn’t take a natural disaster to cause flooding. Even if you don’t live in what is considered a “high-risk” area for flooding, there are a number of everyday occurrences that can cause flooding in and around your home. Water mains burst, drainage systems become overrun, a heavy snowfall melts faster than a neighborhood can bare; these are all common causes of damaging flood conditions. In fact, according to Floodsmart.gov, floods are the number 1 most frequently occurring natural disaster in the United States.
It is important to distinguish between flood damage and water damage when making a claim in order to receive the best assistance from your insurance provider.
First, let’s define what a flood technically is. The NFIP defines a flood as “an overflowing of water onto land that is normally dry.” This means that if water touches the ground before it enters your home, it is considered a flood. A heavy rainfall that cannot be soaked up fast enough by soil and enters your home is considered a flood; so can a nearby river, or a drainage ditch or sewer system overflowing its banks.
When a pipe freezes and then bursts, a heavy rainfall enters your home through a leak in your roof, your water heater breaks down and floods the basement, or your sewer backs up inside the house, these are all considered water damage and not flood damage. Flood insurance will not cover these damages, although your homeowners policy likely will, depending on the specifics of the policy.
Flood insurance coverage can be purchased by homeowners, condo owners, and renters and applies to both residential and commercial properties. There are two main sections to a flood insurance policy: building and personal contents.
The building section of the policy covers the building itself, the building’s foundation, utility systems like your electric and plumbing, your major appliances, permanently installed fixtures like cabinets or flooring, your detached garages, and the removal of debris after a flood.
The personal contents section of the policy covers your furniture, clothing, portable A/C units, throw rugs, washers and dryers, the food in your freezer, and limited valuables.
You have the option to purchase building coverage, personal contents coverage, or both depending on your living situation and budget.
There are limitations to all of these coverage options. For example, your homeowners insurance policy would pay for a hotel room if you had a fire, but your flood insurance policy will not pay for living expenses. The building may be covered at replacement cost, but the personal property in the building may only be covered at actual cash value (the value to buy it today, minus depreciation). Coverage for property you could have or should have moved out of the lowest levels of the dwelling, to avoid damage, will not be covered. If you’re a business owner, there is no coverage for business interruption.
The National Flood Insurance Program has a maximum limit for residential and commercial dwellings. While your homeowners policy may cover debris removal separately if you had a fire, debris removal is covered in the total limit if your flood insurance policy. Theoretically, if your home were a total loss, it’s very possible that you may not have enough money left over after debris removal to rebuild your home. This can be remedied by purchasing supplemental flood coverage to sit over your NFIP plan, if there are specialty companies willing to write that coverage for your area.
If you own your home outright or live in a moderate or low risk area, you are not required by federal law to carry coverage. It is still highly recommended, though, because there are several different types of floods, and not all are caused by nature, that you may be vulnerable to. Flood insurance tends to be very affordable in low-risk areas so it may be worth talking to your agent about it.
Those who live in high-risk areas and have a mortgage through a federally insured lender, or through a federal mortgage program, are required to carry flood insurance. High risk areas are those deemed likely to have a 1 in 4 (25%) chance of having a major flood during the course of a standard 30-year mortgage. If you don’t purchase flood insurance you will have a hard time securing a mortgage
Unless you are buying a new property, there is a 30-day waiting period from the date of your application until your NFIP policy goes into effect. This rule is in effect to protect insurance companies from individuals who may wait until they hear a storm is coming to attempt a purchase. A flood could strike at any time, and as we’ve seen in Texas, may be much worse than predictions. Talk to your insurance professional now to assess your risk and your options.
Headquartered in Falls Church, Virginia and with a mid-west office in Louisville, Kentucky, Foundation Insurance Group is an independent full-service insurance agency specializing in auto, home, life, and business insurance. Since our founding in 1994 the mission has been simple: “Our mission is to provide solid solutions backed by superior service at a competitive price.” For years we’ve partnered with a variety of top rated insurance carriers to fulfill this mission and to provide our clients with tailored insurance programs that fit the unique needs of an individual or business.
For more information about what water damage is covered by your homeowners insurance and whether you are vulnerable to flooding and need flood insurance, talk to the insurance professionals at Foundation Insurance Group. They will review your current homeowners policy and make sure that your home and property are fully protected. Contact us today, or visit our website: www.foundationinsurancegroup.com.