Seven Most Common Questions We Get About Flood Insurance

Spring is here which brings flood danger to many parts of the country. If you live in an area where flooding is common you probably have some questions about flood insurance. We put together answers to the seven most common questions we get about flood insurance. 

Here is everything you need to know about flood insurance:

Is flood insurance mandatory? 

If you own your home outright, you have complete control over whether or not you carry flood insurance. However, if you have a mortgage on your home or have received disaster assistance in the past, you may be required to carry flood coverage.

• Federally Insured Lenders: If your home or business is located in a high-risk flood area and you have a mortgage from a federally regulated or insured lender, you may be required to carry flood insurance. This can also apply to homes and businesses in moderate to low risk flood areas, depending on your lender. 

Mortgage lenders often require flood insurance for homes in moderate to low risk areas to protect their investment in the home as flood damage can cause tens of thousands of dollars’ worth of damage and if you are not insured, those costs fall to you. 

• You Received Disaster Assistance in the Past: If your home is in a high-risk flood zone and you have received federal disaster assistance in the past, you may be required to carry flood insurance if you want to be considered for any future federal disaster aid. This type of aid includes grants from FEMA or low-interest loans from the U.S. Small Business Administration. If you choose to not carry flood insurance, you will be ineligible for this type of aid if your home floods. 

Is Flood Insurance Worth It?

While it certainly varies by situation, flood insurance is almost always worth the cost. Flood damage can be extremely expensive, just one inch of water can cause more than $25,000 worth of damage. Unless you can easily afford these types of repairs, you should absolutely be carrying flood insurance. 

Even if you live outside of a high-risk flood zone you should consider flood coverage. According to government statistics, over 20 percent of flood claims come from properties outside of high-risk flood zones.

What Does Flood Insurance Cover?

Flood insurance purchased through the National Flood Insurance Program (NFIP) does come with coverage limits. The following are covered:

• Structure of Your Home: A NFIP policy will cover the physical structure of your home as well as its foundation, plumbing and electrical systems. Central air and heating systems are also covered as well as built ins in the house. It also protects detached garages. These policies are replacement cost policies for a primary home and actual cash value for a second home. The maximum coverage level is $250,000 so if your home would cost more than that to rebuild, you may need to find supplemental coverage in the private market. 

Private market policies also have coverage limitations so make sure you fully understand the policy before signing on the dotted line. 

• Contents Coverage: These policies also protect your personal property. This includes items such as: clothing, furniture, electronics, curtains, appliances; freezers and food. It may protect high value items such as art, collectibles and jewelry but only up to a specific limit. NFIP policies come with a $100,000 coverage cap. 

What Flood Insurance Doesn’t Protect

Flood insurance doesn’t ever cover damage in a basement. In addition, outdoor furniture and patios or decks are also not covered. Here are a few more items that are not covered by a standard flood insurance policy:

• Certain valuables such as currency, precious metals, and stock certificates
• Outdoor property, this includes decks, fences, patios, landscaping, wells and septic systems, and even hot tubs and pools
• Additional living expenses. If your home is uninhabitable due to flood damage, a standard flood insurance policy does not cover hotel rooms, restaurants or other living expenses. 
• Cars and other vehicles 

Does Homeowners Insurance Cover Flood Damage?

This is a common mistake, a standard homeowners insurance policy does not offer any flood protection. If you want to be protected from flood damage, you must carry a separate flood insurance policy. 

Can I Purchase Flood Insurance After a Storm is Headed My Way?

The quick answer is no. NFIP flood insurance policies have a 30 day waiting period which means that coverage does not kick in until 30 days after you purchase the policy so if you wait to buy coverage until a storm is on its way, you are out of luck. 

Most private market flood insurance policies come with a waiting period as well. While the waiting period can be less than 30 days (10 days is common), it is still not going to do you any good if a storm has already formed. The best advice is to purchase coverage well before storm season hits. 

How Much Does Flood Insurance Cost?

The cost of flood insurance can vary dramatically depending on where your home is located. While a house in a low risk flood zone may only cost $200 a year, if your home is located oceanfront your premium could be in the thousands of dollars a year. According to the NFIP, the average price of a flood insurance policy is $700 a year.

Prices in the private market tend to be higher as NFIP policies are subsidized by the federal government but in some cases, the costs can be lower. It is always a good idea to get a quote from both the NFIP and a private insurer.