How to Buy Flood Insurance to Protect Against Water Damage

by Nicholas Rogers June 12, 2010 in Home Insurance Topics

Many homeowners make the mistake of thinking that they will be covered for flood damage by their regular homeowners insurance coverage. This is not necessarily the case, even if insurance covers hurricanes and windstorms, as the majority of policies will not cover flood damage at all. Those that are required to have flood insurance and those that would like it may need to use the National Flood Insurance Program to buy a policy.

What is the National Flood Insurance Program?

The National Flood Insurance Program (NFIP) was established by Congress in 1968. Its aim is to make flood insurance accessible to members of communities that participate in the program. The program is managed by FEMA and involves 90 insurance companies that can sell policies to home and business owners and to renters.

Is Flood Insurance Mandatory?

A property that is mortgaged by a federally regulated or insured lender and that is located in an area that is designated as high flood risk (1%+ chance of flooding in a year) must have flood insurance in place. Those in areas that are given a moderate to low risk are not required to have coverage but it may make sense to buy a policy anyway. According to floodsmart.gov (the website of the NFIP) a quarter of flood-based claims come from moderate to low risk areas.

How Much Does Flood Insurance Cost?

The insurance companies that sell flood insurance through the National Flood Insurance Program have to adhere to set rates. But, the premiums charged may differ according to the circumstances of the property. Factors that are taken into consideration when rates are quoted include the level of risk, the age of the property, its construction type and the stored location of its contents.

What Coverage Does Flood Insurance Give?

The flood insurance sold by NFIP companies can cover buildings and contents or can deal with either element individually (depending on the policies available/chosen). Building coverage may include:

The building itself and its foundation.
Electrical and plumbing systems (including central air conditioners, water heaters and furnaces).
Some appliances such as refrigerators, stoves and built in items.
Permanently installed carpeting, cabinets, bookcases, wallboard and paneling.
Window blinds.
Debris removal.

Building coverage can be arranged from $20-250,000 depending on the rate band of the property. Detached garages will be given up to 10% of the coverage. Any other detached buildings will need a separate flood insurance policy.

Contents coverage, if taken, may typically include:

Personal belongings.
Furniture, curtains and any carpets that are not part of building coverage.
Portable appliances (including air conditioners, microwave ovens, washers, dryers, freezers and dishwashers).
Some valuable possessions (up to a $2,500 limit).

Contents coverage can be arranged from $8-100,000 depending on the rate band of the property.

What Will Flood Insurance Not Include?

Flood insurance will not pay for any damage caused by mold, moisture or mildew if the homeowner could have prevented this happening. Basement water damage coverage is also limited. It also won’t include:

Possessions kept outside of the building.
Most self-propelled vehicles (i.e. cars).
Business interruption losses.
Loss of cash, precious metals and valuable papers.

This kind of policy will also not help with costs incurred if water damage means that a property needs to be vacated. These expenses may, however, be covered by Alternative Living Expenses insurance which may be already included in a regular homeowner’s policy.

Those reviewing their flood insurance needs may also want to check out their hurricane and windstorm coverage at the same time. Flooding may well often be caused in tandem with wind damage but flood insurance may not be designed to pay for non-water related issues.

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