If my home floods, am I covered?

Water damage to your home and the property inside is a major threat to anyone with assets to protect.

While there are many possible sources of water damage, the damage caused by floods leaves homeowners with the greatest possible financial exposure.

Flood definition: A flood is generally defined as an overflowing of a large amount of water beyond its normal confines, especially over what is normally dry land. Virtually every standard mass-marketed insurance policy excludes all damage caused by a flood. For those who still choose these “standard” insurers, the only way to obtain flood coverage is through the National Flood Insurance Program (NFIP).

The premiums for a flood policy are based on the flood zone where the property is located, and can vary widely. The NFIP policy can be somewhat limited in what coverage it will offer, but may be the only option, particularly for those with coastal properties.

Many people believe you are only in a “flood zone” if your property is located near a body of water, or an area where flooding occurs regularly. The reality is that almost every home in the United States is in a flood zone, with the majority being in “preferred flood zones.” For properties in these zones (B, C and X), a preferred flood policy generally costs less than $400 annually. 

Also important:

• Flood insurance coverage limits are standard in NFIP policies. The maximum amount which can be purchased is $250,000 for a dwelling, and $100,000 for contents.
• The claim settlement basis through NFIP will pay for the dwelling on a replacement cost basis if you have purchased the maximum limits ($250,000). The contents are always paid at “actual cash value” (depreciated based on age).
• NFIP flood policies do not cover the cost of additional expenses like temporary housing and meals while the residence is inhabitable.
• The NFIP policy is limited to $2,500 for fine art, furs, jewelry, collectibles and business property.
• “Excess” flood policies are available for limits exceeding $250,000/ $100,000.

Some statistics that reinforce the need to protect from the financial devastation of a flood:

• Floods are the number one natural disaster in the United States.
• Over the past decade, the average flood claim has exceeded $50,000.
• Midwest (Illinois) flooding is on the rise: One report details flooding in April 2013, which resulted in $465 million in damages, and four fatalities.
• Hurricane Harvey (August 2017) dumped 50 inches of water onto Texas in just 24 hours, causing $180 billion in damages. Less than 20% of those affected had flood insurance in place. 

Considering the U.S. average of over $15 billion in flood claims annually (and another $10- to $20 billion in uncovered losses), choosing the right solution is paramount.