Flood Insurance for Homeowners & Legal Limitations
Most ordinary homeowners’ insurance policies do not cover damage caused by hurricanes and floods. People who live in an area (or who own a vacation home in an area) where these events are common should consider purchasing additional insurance to cover flood and hurricane damage. In fact, your mortgage lender will require purchasing flood insurance if you buy a home in a designated high-risk flood zone. These policies also may cover issues such as mudslides, dam failures, storm surges, and high volumes of melted snow. In contrast to other types of insurance, you probably will need to wait 30 days after you purchase the flood insurance policy before coverage starts. This makes it important to act promptly once you realize that you need insurance.
The Federal Emergency Management Agency (FEMA) runs the National Flood Insurance Program (NFIP), which offers flood insurance. As long as you own a home in an NFIP-participating community, you should be able to obtain flood insurance. The policy may cost several hundred dollars per year on average. It may cost much less if you do not live in a designated high-risk flood zone because you will qualify for a preferred-risk policy.
Coverage for Contents and Property
Flood insurance will provide up to $100,000 in coverage for contents (personal items inside your home) and up to $250,000 in coverage for property (the structure of the home itself). You must buy each of these types of coverage separately, even if you buy them through the same policy. In terms of contents, the coverage will pay the actual cash value of the personal items at the time that they were lost. They will have depreciated as used goods, so you will not receive the price that you paid for them. In terms of property coverage, an insurance policy for a single-family home that is your primary residence may allow you to receive replacement cost coverage. This is more generous than actual cash value because it does not take depreciation into account. Property coverage will amount to at least 80 percent of the replacement cost of the home, as determined in advance, or the maximum amount that the NFIP permits.
When Is Flooding Covered?
To be covered under a policy, the flood must have affected two or more properties or have covered at least two acres with water.
Restrictions and Limitations
Some homeowners are surprised to find out that certain items are excluded from flood insurance policies. For example, a policy does not cover floods caused by swimming pools or other artificial sources, such as pipes bursting or toilets overflowing inside your home. If the water came from inside your home, you probably can use your standard homeowner’s policy. Flood insurance also does not cover damage to parts of your property outside your home, such as gardens, orchards, and terraces. Any structural improvements to below-ground areas probably will not be covered, nor will any personal items in those areas. Cash, stock certificates, and other important papers are not covered.
Flood insurance will not provide reimbursement for the cost of living in a hotel room or securing other living arrangements during the repairs. If you run a business from your home, flood insurance will not cover the losses that your business sustained.