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Flood Insurance 101: What Does It Cover & When You Need It

Flood insurance is designed to protect an insured structure in times of flood damage. A standard home insurance policy won’t offer compensation for losses incurred by your property from flood damage. Thus, if your house is located in a flood-prone area, it’s better to sign up with a flood insurance policy for your own good. You can purchase flood insurance from NFIP (national Flood Insurance program) or from private insurance companies. A standard flood insurance policy will generally offer coverage worth $250,000 for home (not the land) and $100,000 for personal properties. It’s better to buy both but you can also buy individual policies.

What qualifies as flood damage?

Before getting into further discussion, let’s see what kind of condition is dubbed as “flood damage”:

  • Damage from huge inflow of water covering minimum 2 acres land which usually stays dry
  • Massive flow of water damaging at least 2 properties of which one should be your home

Flood insurance won’t cover water damages caused from drain backups of sewer. To qualify for flood damage, the “water” must come from:

  • Overflowing tidal or inland water
  • Mudflow
  • Unusual accumulation of surface water, regardless of the source

The level of flood risk shown by your area will determine whether or not you will need to sign up with flood insurance. For some areas, it’s mandatory to get flood insurance as per the rules of the government.

What does the flood insurance policy cover?

A standard flood insurance policy will extend coverage for – structure of home and its contents. It’s to stress here that such a policy won’t cover for the land where your home is built upon.

Coverage for structure of home includes:

  • Foundation of the property
  • Central AC & furnace
  • Electrical & plumbing
  • Refrigerator, stove & build-in appliances
  • Water heaters
  • Carpet installed (permanently) on unfinished floor

Coverage for contents that are inside the home includes:

  • Furniture
  • Clothing
  • Portable AC units and portable microwave ovens
  • Electronic items
  • Washers & dryers
  • Dishwashers
  • Part of carpeting which isn’t covered by the previous category

What flood insurance does not cover?

There are certain things that flood insurance won’t usually cover. These mostly include highly valuable stuff such as precious metals, valuable paperwork and currencies. Your flood insurance policy won’t offer coverage for most of the self-propelled vehicles including your car.

Besides, personal belongings stored in basement won’t be covered by the flood insurance as well. For example, even though flood insurance ensures protection for clothing or electronic items- you won’t get the coverage if they were stored in your basement at the time of flood. Thus, if you are staying in a flood-prone area, don’t stuff most of your items in your basement.

Limited coverage

A standard flood insurance policy will usually offer limited coverage on highly valued and expensive possessions- like furs and artwork. In this case, your insurer will fix a certain limit of coverage, say, $2,500. So, if unfortunately, your fur gets damaged in flood, you will get the reimbursement up to $2,500 only- regardless of the total expense imposed by the damage.

Who will need flood insurance?

The level of flood risk shown by your area will determine whether or not you will need to sign up with flood insurance. For some areas, it’s mandatory to get flood insurance as per the rules of the government. But then there are flood-risk areas where it’s not legally compulsory to get flood insurance but you should get it for your own good. The FEMA (Federal Emergency Management Agency) has clearly defined the flood risk regions into 3 categories- High-risk area, Moderate-to-low risk zones and undetermined risk zones. You can check out the areas from FEMA’s website online.

High-risk zones

Also termed as SFHAs (Special Flood Hazard Areas), the high-risk zones show 25% risk of being under flood in 30 years. Most mortgages run for 30 years and hence your lender will certainly ask you to get flood insurance in your house is located in a high-risk flood area. More importantly, it has been made compulsory by federal government to sign up with flood insurance if you are staying in a high-risk flood area.

Moderate-to-low risk zones

As you can get from the name itself, these areas are at a comparatively lesser risk of flood damage than the previous one. But you should also know that 20% of flood damage claims come from these areas. Thus, although it’s not legally mandatory to get flood insurance for people staying in these regions- it’s still advised to get it.

Undetermined risk zones

The undetermined risk areas refer to regions where flood analysis hasn’t been conducted. However, these regions still pose risks of flood damage and flood insurance is recommended for residents here.

Tips to save money in flood insurance policy

We will wind up our discussion with tips on handy savings of flood insurance policy.

Elevate equipments and machineries

Try to store your important appliances and stuff above base flood level. If these items are kept below base flood level, you will have to count surcharge on your insurance premium.

Flood-proof your home

Try to incorporate materials that can resist flood damage. Your insurance company will be happy to provide you discounts if you can prove to them lower possibility of claims from your side.

Check flood openings

As per FEMA guidelines, the flood openings of a home must 100% comply with the building code regulations of the respective zone. If not, you will only end up paying higher flood insurance premiums every month. So, check whether the flood openings in your home are compliant with the FEMA standards or not. If not take the needed steps to address the situation.

Elevate your building

Do you know an elevated property can earn more than 50% discount on a flood insurance policy? Yes, you heard it right. If the property can be elevated up to 3 ft at least over base flood level, you will be rewarded with 60% discount. Similarly, you will get 30% discount if you can elevate your home up to minimum 1 ft above the base flood level.

It may seem pricey to flood-proof your property or make the adjustments mentioned above. But the good thing is FEMA offers assistance programs to help you with the necessary home improvement tasks.

If you would like to learn how to save on your regular home insurance, check out our 25 cheap homeowners insurance tips.

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