Does My Homeowners Insurance Cover Flood?

Oct 17, 2021 | Personal Insurance

It’s important to know all the information about the coverage of your homeowners’ insurance. Being aware of what it protects and what is not is essential to avoid being underinsured in case of a disaster. Like a flood, standard homeowners’ and renters’ insurance does not cover floods. Protecting your house from the risk of flood damage is a must to keep your assets safe. So if you still don’t know how important this coverage is, here is a piece of detailed information you should know. 

Does homeowners’ insurance cover flood?

Flood insurance is a stand-alone policy that you can add to your homeowners’ insurance. It has comprehensive coverage that protects your home from the damages caused by flooding regardless of the causes. 

According to FEMA or Federal Emergency Management Agency, flood is very common in the US. There is a 25% chance that you will experience flooding within a 30-year mortgage period. And mostly, the damages are not always part of the coverage. In other words, there is always a chance that you will experience flooding, and having insurance is your best choice especially if you are living in a flood-prone area. 

How much is Flood Insurance in homeowners’ insurance?

According to FEMA, the average cost for flood insurance across the U.S. ranges between $800 – $1,200 per year. However, this amount can vary greatly depending on where you live, your location’s flood risk, the policy coverage you have, and any additional coverage plans you get, like contents and building coverage.

Also, your deductible is one of the factors that can affect the cost of your flood insurance. The lower the deductible, the more costly your insurance will be. So the best way to manage the amount of your flood insurance is to get a quote. Knowing all the things that can impact your premiums can help you decide how to choose the best policy for you. 

WHAT DOES FLOOD INSURANCE COVER?

Having additional coverage to your standard home insurance always means extra dollars to pay each month. I know it may sound a lot. But knowing what flood insurance covers can help you understand better whether you really need it or not. 

Building property coverage

Building property protects the structures of your house. This includes your house itself and structures that are in your property like your detached garage. Also, your house’s heating system, electrical system, and air conditioning system. 

You can choose how you want your payouts. You can choose between Replacement Cost or Actual Cost Value. Now here is a quick explanation for both:

Replacement Cost Value – It is the amount of your property without deducting the depreciation amount. So let say you experience a total loss. Your house was destroyed by a flood and needs to be built again from the ground. Your insurer will pay for rebuilding your home the same as before. Using the same materials and same quality. 

Actual Cash Value –   Having an Actual Cash Value policy means in case of a total loss, your insurer will just pay you the amount of your house today. So if you bought your house 10 years ago, expect that its amount already depreciated. Meaning the actual cash value of your home now is not enough to build your house the same as before. If this happens, you should pay the remaining amount needed to finish your house.

Contents Coverage

Personal contents coverage protects your belongings such as your clothes, gadgets, furniture, appliances like the refrigerator and its contents. It can also cover some of your art decors but if you have expensive art collections or other over-the-top collections like guns or furs, you need to have a separate policy for that. You can add Umbrella Policy to secure your expensive possessions. Now, when it comes to personal contents coverage, the payouts are usually Actual Cash Value only. So everything that you have will change depending on their current value after depreciation. 

What‘s not part of flood insurance in homeowners’ insurance?

It is important to know what the coverage of flood insurance is, and so the things it does not cover. So here are the typical things that basic flood insurance do not cover:

  • Living expenses while you are waiting for your house to build again –  In case of a total loss, your house will be build again. Meaning your house is no longer inhabitable and you need to move out of your house while you wait for it to be build again. The expenses that you need after you move out are not part of your flood insurance. For example, you need to rent a house or condo temporarily. You need to pay for the mover guys to transport your stuff to your new place, and the rent and transportation fees are not part as well.
  • Mold, mildew, and moisture – Although these are common water damages, they are not part of the coverage. Flood insurance can’t cover them. It is because these can be avoidable if treated earlier. So in case of a flood, as soon as it’s safe, check your ceiling and walls right away. Make sure that there is no water leakage anywhere. Don’t underestimate even the slightest form of molds because it can cause you more than you know if not prevented sooner. 
  • Other detached structures outside your home – Yes it may be confusing since a garage is part of it. However, other detached structures such as fence, deck, swimming pool, gazebo, patio, and septic system are not part of the said coverage. 
  • Vehicles like car, motorcycle, and RV Truck – Any vehicles on your property that receives damages by floods are not part of the coverage. But don’t fret because your auto insurance can protect them, so as long as you have insurance, there shouldn’t be any problem. 

Do I need to add flood insurance to my policy?

If you live in high-risk areas, yes you need to have flood insurance. And if you have a mortgage, you may even be required by your lender to add this policy. Because anyone who buys a house with government-backed financing or a government-issued home is required by federal law to buy flood insurance. 

According to FEMA, a flood has been experienced by 50 states. 20% of the flood claims came from states that only have moderate to low risk areas. This data was backed up by FEMA’s official website, FloodSmart.gov. They say that a flood can happen in any area when it rains. Therefore, even if you are living in a moderate to low-risk flood area, you can experience a flood. But here’s the good news. Flood insurance in low-risk areas costs less.  The choice is up to you if you want to add it or not.

Also, be mindful that risk can change. Especially now that weather conditions shift from time to time. There are lots of factors that can affect these changes. It can be due to FEMA’s decision. Also, communities tend to correct some errors on the maps, or just because of climate change that the whole world is now experiencing. 

What if I live in a low to moderate risk area and I don’t want to purchase flood insurance?

Understandably, people don’t want to have an additional fee to pay each month especially if they might not need it at all. Most homeowners believed that they didn’t have to add flood insurance until they experienced a flood. 

So if you are one of those people who don’t want to have this coverage, you should at least know your options. Homeowners who live in low to moderate risk areas are not required by federal law to purchase flood insurance. But if you consider having just the minimum coverage, Preferred Risk Policies are Standard Flood Insurance Policies  ((SFIPs) offered by NFIP to homeowners living in low-risk areas for just a low cost.

Now, let’s say you don’t want to purchase flood insurance even for a low cost. Then in case of a flood, since you are not covered you need to pay for all the water damages to your home. Some rely on Federal Disaster aid, however, it usually takes months before you can get one. Also, not all perils can offer Federal Disaster aid. The President needs to declare first that an area is in a natural disaster state. Then you should be qualified to receive the assistance before you can have one. 

While disaster victims who don’t have insurance at all are just relying on Disaster Loan Programs of SBA or Small Business  Administration. The SBA loan can give up to $200,000 to homeowners for them to repair their house. Moreover, they can receive up to $40,000 for the repairs or replacement of personal property or house contents. SBA is willing to give a maximum of 30 years for the loan to be paid with low interest. 

Where can I buy Flood Insurance?

There are two options to get flood insurance. You can have it from the National Flood Insurance Program. NFIP is the federal plan from FEMA. Most homeowners and renters get their flood insurance from NFIP. If you want this option, you can ask your insurance agent to process an application for you. 

The next option is from Private Personal Flood Insurance that you can avail from insurance companies. This is suitable if you think that FEMA’s coverage is not enough to protect all your assets. Flood insurance from insurers can have broader coverage and have more options than FEMA. Therefore, you should weigh in your options on where to get your flood insurance and just choose where you can get the proper coverage you need. 

Who Qualifies For NFIP?

Today, there are over 20,000 communities throughout the United States who already participate in NFIP. If you want to know if your community is included on the list, just check FEMA’s Community Status Book and find your address there. If your community is on the list, you can then call FEMA to enroll. Or again, ask your insurance agent if they can help with it. 

What is coverage of  NFIP?

If you consider getting your flood insurance with the National Flood Insurance Program, it is only wise to know first what it covers. Typically, a standard NFIP coverage can only protect your property from damages due to a sewer backup. But for major flood damages, you need to have the broader coverage of NFIP flood insurance.

How much flood coverage do I need?

Before adding flood coverage, you need to know first how much coverage you need. Because having the right estimate will help you decide where you should get your flood insurance. Now, how can you get the most accurate estimate of your house? First, you need to know how much will it be to rebuild your house again in case of a total loss. This information may already be available. Remember you also get your house’s estimate when you start looking for your homeowners’ insurance. So you just need to check and update it if you recently do some upgrades or renovations in your house. 

The National Flood Insurance Program can provide up to $250,000 coverage. So let’s say our community is on the list of NFIP and the amount to rebuild your house is under $250,000. With that amount, you can get your flood insurance with NFIP. However, if the amount to rebuild your house is $350,000, you should get your flood insurance from a private flood insurance company since the amount is more than what NIFP can cover. 

Also, even if your house is less than $250,000 and your community is covered by NFIP, the choice where to get your flood insurance is always yours. So if your homeowners’ insurance provider offers flood insurance and you want to get it from them, you can do so. 

Conclusion

Due to tremendous changes in weather, we can never tell when we experience a flood or other natural disasters. That is why being covered can be your best option to protect your family. Let us help you! Our team is one of the best independent insurance agencies in Denver, Colorado, and other parts of the U.S. Call us on our toll-free hotlines (855) 973-1202 or (855) 712-6584. Let our team be your advantage!