Facts about flood insurance

Flooding is one of the most common and devastating natural disasters in the United States, with 90% of all natural disasters involving some form of flood. Yet, many people are unaware that standard homeowners insurance does not cover flood damage. Whether you live in a high-risk or low-risk area, understanding flood insurance can help protect your home and finances from unexpected flood-related losses.

The Risk of Flood Damage

Floods can happen anywhere—whether caused by inland flooding, flash floods, or seasonal storms—and no region of the U.S. is immune. FEMA reports that 90% of all natural disasters in the country include some type of flooding. Even if you don’t live in a high-risk flood zone, it’s important to remember that 20% of flood claims come from low-to-moderate risk areas. Flood risk can be unpredictable, so it’s crucial to prepare.

If you’re moving to a new home, apartment, or business location, ask your mortgage lender, local officials, or insurance professional about the area’s flood history. The National Flood Insurance Program (NFIP) can also provide flood risk information specific to your area.

What Does Flood Insurance Cover?

Flood insurance is different from standard homeowners or renters insurance, which does not cover flood-related losses. Here are some key aspects to understand about flood insurance:

• Separate Policy Requirement: Homeowners and renters must purchase separate flood insurance policies. This is often available through the NFIP, a federal program administered through FEMA, where local governments adopt floodplain management regulations.
• What It Covers: Flood insurance typically covers direct physical damage caused by flooding, such as water damage from rising water, severe storms, flash floods, or abnormal tides. It also covers flood-related erosion from waves or water currents.
• Coverage for Structures and Contents: Flood insurance policies for homes provide separate coverage for the structure and its contents. The building is typically insured for replacement cost, while personal belongings are covered at actual cash value (depreciated value).
• Coverage Limits: NFIP policies cap coverage at $250,000 for the building and $100,000 for personal property. If you need higher coverage limits, private insurers offer “excess” policies to supplement NFIP coverage.
• Flood Damage to Vehicles: Standard auto insurance policies with comprehensive coverage usually protect against flood damage to your vehicle.
• Commercial Flood Insurance: Businesses can purchase flood insurance through the NFIP with coverage up to $500,000 for buildings and $500,000 for contents. Like homeowners, businesses can also seek “excess” coverage from private insurers to cover higher-value properties.

Buying Flood Insurance: Key Considerations

Flood insurance is accessible, but there are a few things to keep in mind:

• Easy to Purchase: Nearly 100 insurance companies write and service NFIP policies, making it easy to buy flood insurance through your insurance professional.
• 30-Day Waiting Period: Flood insurance policies generally require a 30-day waiting period before they take effect. Don’t wait until a storm is approaching—plan ahead and purchase your policy in advance.
• “Excess” Coverage: NFIP coverage limits may not be enough for everyone. Many private insurers now offer excess flood insurance, which can provide additional protection beyond the NFIP’s maximums. Some even offer “first dollar” flood policies, which provide coverage without requiring the NFIP policy as a base.

What If I Don’t Have Flood Insurance?

Without flood insurance, the financial burden of flood damage can be overwhelming. While federal disaster aid is sometimes available if your area is declared a disaster zone, this often comes in the form of loans. These loans must be repaid, which can leave you facing significant financial hardship.

Flood insurance is the best way to ensure your property and assets are protected from flood-related losses. By investing in a flood policy, you safeguard yourself from the high costs of repairs and rebuilding, giving you peace of mind in the event of a disaster.

Conclusion

Flooding can strike anywhere and cause extensive damage, even in areas not considered high risk. Standard homeowners insurance won’t cover flood-related losses, so it’s essential to explore your flood insurance options and get the right coverage for your needs. By understanding the basics of flood insurance and preparing in advance, you can protect your home, business, and belongings from one of nature’s most common disasters.

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