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Return To: Flood Insurance – The Ultimate Guide
In November 2020, tropical storm Eta caused some of the worst and deadliest floodings in North Carolina since 1995.
You may be thinking that there’s no way to prepare for floods because of their highly unpredictable nature, but the opposite is true. One of the options you can consider is to renovate your property in such a way that it can withstand, if not minimize, the damage that flooding can cause. Another is to get flood insurance to safeguard your property and belongings in case a flood does occur in your area.
Those who have flood insurance tend to have more peace of mind knowing that they would be able to recover from the possible damages and loss that would result from massive flooding. If you’re interested in getting flood insurance, continue reading to find out what flood insurance covers.
Definition Of Flood According To FEMA
According to its list of definitions, the Federal Emergency Management Agency (FEMA) defines flooding as “a 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 the policyholder’s property).”
Further to FEMA’s definition, the list states that flooding can be caused by an overflow of inland or tidal waters; a rapid and unusual accumulation or runoff of surface waters from any source; or mudflow. Erosion or undermining are also cited as causes of flooding if they result in the collapse or subsidence of land along the shore of a lake or a similar water body whose waves or water currents exceed anticipated cyclical levels.
To reduce the impact of floods, FEMA manages the National Flood Insurance Program (NFIP), which provides flood insurance to property owners, businesses, and renters, so they can recover from the damages they’ve suffered due to flooding.
What Is Flood Insurance?
Flood insurance is a policy that can cover your physical property (i.e. the structure of the building itself), as well as its contents. Depending on your policy, you can either have your building covered, your belongings covered or both. It is important to note that flood insurance is separate from homeowners’ insurance, as the latter does not usually include coverage for damage caused by flooding.
The majority of residential flood insurance policies are covered by the NFIP and policies can be purchased through most insurance agents even though the underwriter is the federal government.
Regardless of where you’ve purchased the NFIP policy, a standard premium is required by FEMA for those living in areas that have a low to moderate risk of flooding.
High-risk properties, on the other hand, will likely have a premium that takes into account several factors, such as the property’s proximity to water, age and condition, elevation level, and value.
The FEMA Risk Rating 2.0 outlines a comprehensive list of factors that are considered when calculating for the premiums of high-risk areas.
While it may seem like an added expense, flood insurance may turn out to be a small price to pay to keep your property and assets safe, especially if you’re in a flood-prone area.
According to FEMA, just an inch of floodwater can result in as much as $25,000 in damage, so securing flood insurance may be the wisest route to take to minimize the impact you could potentially suffer if your property becomes inundated.
Besides, flood insurance is also often required by government-backed lenders when you want to get a mortgage, thus making this a worthy and necessary investment.
When choosing coverage under the NFIP, residential and commercial establishments have different limits. Depending on whether you have building coverage, personal contents coverage, or both, the limits are as follows:
| Residential | Non-residential/Commercial | |
| Building Coverage | $250,000 | $500,000 |
| Personal Contents Coverage | $100,000 | $500,000 |
What Does Flood Insurance Cover Besides Flood?
According to Chapter 11 of FEMA’s Reducing Damage from Localized Flooding: A Guide for Communities, insurance payments don’t only cover flood damage, but they can also be used to cover a portion of mitigation costs that communities might have to pay to comply with local regulations.
Some instances in which this can be applicable are when a building needs to be elevated above the base level of flood elevation, flood-proofing a building, or even demolishing or relocating a property. In this case, Increased Cost Compliance coverage of up to $30,000 may be provided in addition to claims that would cover flood damage, which is limited only by the maximum amount stated in the policy.
What Does Flood Insurance Cover on a Home?
Getting flood insurance for your residential property can let you protect both the actual building and the contents of your home. These policies classify which parts of your home are included in-building coverage and which of your belongings fall under personal contents coverage.
What Does Flood Insurance Cover on a Structure?
When it comes to the physical structure of your home, building coverage includes the following:
- The home itself and its foundation (e.g., walls, anchorage systems, staircases)
- Detached garages (limited to 10% of your policy, and a separate policy is needed for other detached structures in your residential property)
- Permanently installed furnishings such as cabinets, panelings, bookcases, and carpeting over an unfinished floor
- Window blinds
- Electrical and plumbing systems
- HVAC equipment such as furnaces, water heaters, and air conditioning systems
- Built-in appliances such as a dishwasher, and other kitchen appliances like stoves and refrigerators
- Other equipment such as well water tanks and pumps, fuel tanks, and solar energy equipment
Basically, what’s included in building coverage are things that make up the house itself and items that render it functional and habitable.
Does Flood Insurance Cover Contents?
Aside from the physical structure itself, flood insurance also covers personal contents, which simply means your personal belongings. It is important to note that what you can get in claims are not based on how much you’ve paid for the covered items, but their actual cash value.
Contents coverage includes the following:
- Personal belongings such as clothing, furniture, and electronic equipment (e.g., gadgets or mobile phones)
- Curtains
- Carpets not included in building coverage
- Appliances that are portable (e.g., microwaves, air conditioners, washers and dryers, dishwashers)
- Freezers and the food contained inside
- Valuable items such as furs or original artwork (limited only up to $2,500)
Does Flood Insurance Cover Loss of Use?
Like any other insurance policy, flood insurance also has exclusions and eligibility requirements. Under the NFIP, loss of use is not covered by flood insurance along with the following:
- Damage from mold, mildew, or moisture not directly caused by the flood or could have been avoided by the property owner
- Damage caused by earth movement regardless of whether this movement was caused by flooding
- Temporary housing or additional living expenses while your property is being repaired or is rendered uninhabitable
- Loss of income due to interrupted business
- Properties, items, or belongings outside of the insured building (e.g. trees, wells, septic tanks, plants, decks, patios, walks, seawalls, pools, and hot tubs, storm shelters, boat houses)
- Precious metals, currency or cash, bearer bonds, valuable documents, stock certificates
- Most self-propelled vehicles like cars and their parts (for this, you may have to get an auto insurance policy)
When getting flood insurance, it’s always recommended to talk to a trusted insurance agent, so you will be aware of the policy’s exclusions and eligibility requirements. For instance, a sewer backup can be covered by your policy provided the backup is a direct result of flooding. Basements and crawl spaces also have limited coverage so, if you happen to leave some of your personal belongings there during a flood, these might not be covered by your personal contents policy.
What Does Flood Insurance Cover For Your Rental Property?
While landlord insurance may cover important aspects of your rental property, this type of policy does not often include flood protection. Flood insurance is, therefore, purchased as an addition to landlord insurance policies.
Most landlords make the mistake of not purchasing flood insurance because they’re not located in what is defined by FEMA as Special Flood Hazard Areas (SFHA). Those within the scope of the SFHA are required to have flood insurance since they’re in a flood hazard zone. However, since floods are highly unpredictable, it is recommended that landlords and renters alike purchase flood insurance just in case a disaster occurs.
If you happen to own a rental property, here’s what flood insurance can and can’t cover:
- Unlike properties occupied by their owners, flood insurance for rental properties will cover the cash value of the property but not the replacement cost.
- Central heating and cooling systems, as well as electrical systems and cabinets within a rental unit are also covered by flood insurance for rental properties.
- Appliances, furniture, window coverings, etc., are not included in the standard coverage but can be included in additional coverage.
In the case of renters, renters’ insurance does not generally include flood protection either, so the latter is a separate policy. Landlords may also include flood insurance as a requirement before renters can have a rental unit.
Always Be Prepared
Nobody can tell when floods will occur, so it’s best to always be prepared for such a disastrous event. Keep your property and personal belongings safe by adding flood insurance to your existing policies. This way, you can mitigate the disastrous effects floods can have on your most important assets.