Do you know what the world's most common natural disaster is? It's not earthquakes, tornados, or wildfires. While these devastating events happen regularly around the globe, flooding takes the lead. 40% of natural disasters involve flooding from snowmelt, coastal storms, rain, overflowing rivers, and dam/levee failures.
Flooding can often leave homeowners with significant financial losses. While some people are more at risk for flood damage than others, all homeowners, renters, business owners, and real estate investors should understand flood insurance.
Find out how flood insurance works, what it covers, and what it costs so you can safeguard your property and belongings against an unexpected disaster.
Why Do I Need Flood Insurance?
Over the course of a 30-year mortgage, your home has a 26% chance of being affected by flood damage. That's more than 2.5x higher than the risk of fire damage.
Flood insurance is designed to protect your home, business, and belongings from the damage caused by flooding. Flooding can be a very costly problem, but with flood insurance, you can help to safeguard yourself against potential financial loss due to floods.
Why do you need flood insurance?
- Flood insurance provides financial coverage for repairs and replacement of your belongings if floods damage them.
- Flood insurance helps protect you from being stuck with costs that exceed what your homeowner's policy covers.
- It provides peace of mind knowing that you'll be able to recover financially in the event of flooding.
The biggest reason you need flood insurance is simple: flood damage isn't covered by your other insurance policies, such as homeowners or commercial property policies. You'll need a standalone flood insurance policy to protect your home, business, or belongings against flooding.
What Is Flood Insurance and How Does it Work?
Flood insurance is a type of property insurance that covers losses and damages caused by floods. Flood insurance will provide coverage for restoring your home to its pre-flood condition and any personal belongings damaged or destroyed in a flood.
FEMA's National Flood Insurance Program (NFIP) provides most residential flood coverage in the U.S. Though the federal government underwrites the insurance, you can easily purchase a policy through most insurance agents who sell homeowners insurance.
What Does Flood Insurance Cover?
Flood insurance helps cover damages caused by floods: an overflow of water on ordinarily dry land that can include mudflows, surface water, and seepage.
Flood insurance is designed to cover:
Home structures and essential systems such as walls, roofs, flooring, HVAC, electrical and plumbing, furnaces, pumps, tanks, and solar energy equipment.
Window treatments, carpeting, and appliances, such as refrigerators, dishwashers, washing machines, portable window units, freezers, and even the food stored inside.
Permanently installed furniture like built-in bookcases, paneling, and cabinets.
Detached structures such as garages are used for parking cars or limited storage (10% of your total building coverage can be used toward your garage and its contents).
Personal property such as clothing, electronic equipment, and furnishings are not stored in a basement.
Flood insurance may also help pay for certain living expenses like temporary lodging if you cannot live in your home during repairs.
Dwelling coverage vs. contents coverage
Dwelling coverage, often referred to as Coverage A, is designed to cover the structure of your home if it is damaged by flooding. This generally includes the roof, walls, floors, and other parts of your home that are not considered contents.
Contents coverage, also known as Coverage B, protects personal possessions affected by a flood. These items include furniture, appliances, electronics, clothing, and more. Both types of coverage play an important role in protecting your home during a flood event.
What Doesn't Flood Insurance Cover?
Flood insurance does not cover all damage resulting from a flood. Common exclusions include:
- Mold, mildew, or moisture damage resulting from an owner's neglect of the property (instead of a flood event)
- Damage resulting from earth movement, even if the earth movement happened because of a flood
- Financial losses from business interruptions
- Pools, hot tubs, and other property outside of an insured property
- Valuable papers (such as stock certificates), currency, and coins
Additionally, businesses are not typically covered under residential flood insurance policies. They need to obtain a separate business policy to receive coverage.
What Qualifies As a "Flood" For a Flood Insurance Claim?
The National Flood Insurance Program defines a flood as:
"general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties (at least one of which is your property) from:
- Overflow of inland or tidal waters
- Unusual and rapid accumulation or runoff of surface waters from any source
- Mudflow (a river of liquid and flowing mud on the surfaces of normally dry land areas, as when earth is carried by a current of water)
- Collapse or subsidence of land along the shore of a lake or a similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood as defined above."
In other words, floods are anything from an overflow from a river to heavy rains resulting in flooding from nearby hillsides.
Is Flood Insurance Included in My Home Insurance?
Flood insurance is not usually part of your home insurance policy; it is additional coverage you can purchase. Flood insurance is important for any area that experiences flooding due to storms, rivers overflowing, or other water damage. It typically covers the cost of repairs and replacements to your property if it is flooded. An independent flood insurance policy will offer much better protection than if you buy it as part of a home insurance policy.
How Much Does Flood Insurance Cost?
The cost of flood insurance depends on several factors, including location, building materials, and the age and type of structure.
According to FEMA, the national average rate for flood insurance is $699 per year for residential properties. However, if your home or business is located in a high-risk area that often sees flood damage, the cost could increase to over $2,000. Additionally, purchasing additional coverage for possessions such as electronics and furniture may be necessary.
Are There Different Kinds of Flood Insurance?
Yes, there are different types of flood insurance available. For example, some policies cover only the cost of repairs related to a flood. In contrast, others may cover personal belongings as well. In addition, some policies are available for residential and commercial properties, or just one or the other. Flood insurance can also vary depending on the level of risk in an area; for example, high-risk areas may require more comprehensive coverage.
Flood insurance is critical coverage, but it can often be confusing. Speak to an insurance agent to learn more about these options and which policy best fits your needs today.