First in Protecting, Your Property.
What Nobody Ever Told You About Flood Insurance
When it rains, it pours. And when it pours, rivers and creeks have a tendency to flood. Water can be a very powerful force when it becomes abundant enough, and flood damage can be very costly if you need to make repairs to your home. Unfortunately, many property owners are unaware that flood protection is not included in their homeowners insurance and must be purchased separately.
National Flood Insurance Program Statistics
- Floods are the #1 natural disaster in the U.S.
- The average flood insurance claim in recent years is $35,000.
- From 2002 to 2011, total flood insurance claims in the U.S. averaged nearly $3 billion annually.
- New Jersey is the top state in the U.S. for flood insurance claims. More than $628 million of claims payments were paid in the state in 2011 alone.
- People who live outside high-risk flood areas file more than 20% of NFIP claims and get more than 33% of disaster relief funds.
What Is the National Flood Insurance Program (NFIP)?
The NFIP was instituted by Congress in 1968 to provide flood insurance policies to homeowners, business owners and renters in communities that participate in the program. The flood program, which is administered by FEMA, works with more than 90 private insurance carriers to provide flood insurance to cover damages that result from flash floods, hurricanes, winter storms or heavy rains.
The premiums do not change from company to company; they are set by FEMA and are based on factors like the type of construction of the home, the land the house is built on, the location of the home within the flood plain and other factors. The lower the risk of flood damage, the lower the premium often is.
An important thing to know is that you can buy flood insurance anytime; however, there is a 30 day waiting period after paying your first premium before the policy goes into effect. Don’t wait until a flood warning to consider buying flood protection.
What Kind of Flood Insurance Do I Need?
There are actually several kinds of flood insurance coverage you can purchase:
- General Property Policy – can be used to cover 5 or more family residential buildings and non-residential buildings
- Residential Condominium Building Association Policy – to insure condominiums and townhomes
- Standard Flood Insurance Policy – Dwelling – The most common form of coverage, used to insure up to 4 family residential buildings and single family dwelling units in a condo/townhouse building
For standard dwelling coverage, you have two options:
- Building property coverage – up to $250,000
- Personal property coverage – up to $100,000
You can opt to purchase just one of these, or both – but the NFIP strongly recommends homeowners purchase both coverage options. It’s a good idea to speak with your lender, as a mortgage company can also require you to carry a certain amount and type of flood coverage.
These two combined coverage types will cover most things in your home, with some exceptions. For example, you will not be reimbursed for damage to most cars and ATVs, any belongings outside of the building (including landscaping, septic systems, patios, hot tubs, and swimming pools), currency, precious metals, or stock certificates.
If you have a multi-story home, the coverage could be more complicated depending on your location in a flood zone and the age of your home. Basements, crawlspaces, and walkout basements have limited coverage, no matter the age or type of home you have. If your home has any of these items, make sure to ask your insurance agent about how your items can be protected from flood damage. For example, even if you carry both building property and personal property coverage, you may not have any insurance protection for the following items in your basement:
- Personal items, like clothes, electronics and furniture
- Non-drywall walls or ceilings
- Bookcases and built-in units
- Window treatments
A flood insurance policy won’t ever pay out any more than the exact amount of the policy (i.e. never more than $250,000 for structural damage). You can choose to buy building property flood insurance that’s either at replacement cost value (RCV) or actual cash value (ACV). You can only buy personal property flood insurance at ACV coverage amounts. These two types of reimbursement generally break down this way:
Replacement cost value: The cost to replace items that are damaged, without taking into account depreciation over time
Actual cash value: The cost to replace items at the time of the loss, taking into account depreciation
Flood insurance is complicated. It’s highly recommended that you speak to one of our brokers who can help you get the coverage you need and fully understand your options.
This page has links to related websites used by our clients and the public. As a matter of courtesy, First Underwriters, Inc. provides links to the organizations’ websites, but does not endorse any of the private entities and or their services.
- American Meteorological Society
- Association of State Floodplain Managers
- Community Associations Institute
- Dartmouth College Flood Remote
- Flood Hazards Resarch Centre/Univ of Middlesex
- Flood Insurance Servicing Companies Assn of America, Inc.
- Independent Insurance Agents of America
- Institute of Business & Home Safety
- Insurance Literacy Institute
- Insurance News Network
- National Association of Flood & Stormwater Management Agencies
- National Association of Insurance Commissioners
- National Association of Professional Insurance Agents
- National Association of Realtors
- National Conference of Insurance Legislators
- National Emergency Managers Association (NEMA)
- National Flood Determination Association (NFDA)
- National Oceanic and Atmospheric Administration
- National Weather Service
- Natural Hazards Center
- Pima County Flood Control District FPM
- River Management Society
- US Army Corps of Engineers
- US Department of the Interior
- US Fish & Wildlife Service
- US Geological Survey
- The Weather Channel
In general, flood insurance is only available through the National Flood Insurance Program (NFIP) run by the Federal Emergency Management Agency (FEMA). A few private insurers offer excess flood insurance.
According to FEMA, floods, including inland flooding, flash floods and seasonal storms, occur in every region of the United States and 90 percent of all natural disasters in the U.S. involve some type of flooding. Even if you do not live in a high-risk area, it is worth looking into flood insurance as more than 20 percent of all flood insurance claims are filed in low-to-moderate flood-risk areas.
- Standard homeowners and renters insurance does not cover flood damage: Flood damage is excluded under standard homeowner’s policies, although it is covered under the comprehensive section of a standard auto insurance policy. Only a flood insurance policy, available to homeowners and renters through the federal government, will cover flood-related losses.
- Flood insurance is easy to purchase: Federal flood insurance policies can be purchased directly from an insurance agent or a company representative, and are available to communities that participate in the National Flood Insurance Program. Nearly 100 insurance companies write and service NFIP policies. In order to find an agent or company servicing your area, visit FloodSmart.gov or call (888) 379-9531. Flood insurance is available on a replacement cost basis for the structure of the home and on an actual cash value basis for personal property.
- Flood insurance is affordable: The annual premium for a residential NFIP policy starts at $112 per year, according to FEMA, and increases according to the level of flood risk and amount of coverage needed. The maximum coverage amount is $250,000 for the structure of the home and $100,000 for the contents of the home.
- There is a 30-day waiting period before a flood insurance policy takes effect, so don’t wait until the last minute to purchase it.
- It is easy to assess your flood risk: More than 20,000 communities in all 50 U.S. states and territories voluntarily participate in the NFIP, encompassing nearly all properties in the nation’s high-risk flood zones. Enter your address in the FloodSmart Tool to determine your level of flood risk.
- Excess flood insurance policies add an extra layer of coverage: A growing number of private insurers have begun offering excess flood policies, intended to provide water damage protection to homeowners over and above the coverage provided by the NFIP policies.
- Without insurance, relief from floods primarily comes in the form of loans: If your community is declared a disaster area, no-interest or low-interest loans are usually made available by the federal government as part of the recovery effort. These loans are just that—loans—and must be paid back. Obtaining a flood insurance policy is the only way to protect yourself fully from the cost of flooding.
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