WHAT IS FLOOD INSURANCE?
Flood insurance covers direct physical loss caused by “flood”. A flood is a general and temporary condition where two or more acres of normally dry land or two or more properties are inundated by water or mudflow. In simple terms, a flood is an excess of water on land that is normally dry.
Flood insurance isn’t just for homes in high-risk areas. The Federal Emergency Management Agency (FEMA) says that all 50 states have experienced floods or flash floods in the past five years, and that Flooding is the most common natural disaster in the United States, affecting every region and state. Additionally, it doesn’t take a large flood to cause damage. The damage from just one inch of water can cost more than $20,000.
WHAT DOES FLOOD INSURANCE COVER?
Flood insurance protects two types of insurable property: Building and Personal Contents.
Building property coverage
- What it may help protect: The physical structure of your home and its foundation; plumbing and electrical systems; central air and heating systems; attached bookcases, cabinets and paneling; and a detached garage (other detached structures need their own policy).
- How it typically pays out: Replacement cost basis (what it would take to repair the home in today’s dollars) for a primary residence and actual cash value for a vacation home.
- Maximum coverage limit: $250,000
Personal contents coverage
- What it may help protect: Clothing, furniture and electronics; curtains; some portable appliances; freezers and the foods within them; and certain valuables like art (up to a specified limit).
- How it typically pays out: Actual cash value basis (takes depreciation into account).
Maximum coverage limit: $100,000
WHAT’S NOT TYPICALLY COVERED BY FLOOD INSURANCE?
Equally important is knowing what’s not covered by flood insurance. Here are some of the types of property and expenses that fall outside the scope of a basic flood insurance policy, according to the NFIP’s summary of coverage:
- Moisture or mold/mildew damage that “could have been avoided by the homeowner”
- Currency, precious metals, and paper valuables like stock certificates
- Outdoor property such as decks, fences, patios, landscaping, wells and septic systems, and hot tubs and pools
- Living expenses, like temporary housing (if flood damage deems your home uninhabitable)
- Cars and other self-propelled vehicles (but your auto insurance may offer some coverage for your car)