Hurricanes Harvey and Irma have placed a renewed focus on flood insurance. Nobody knows when the next natural disaster or flood will force them to evacuate their home. When all seems lost flood insurance can be a financial blessing. Before you sign up for just any policy, you need to consider the following information.
Homeowner’s Insurance Do Not Cover Floods
It’s safe to assume your existing homeowner’s insurance policy will not cover flood damages. You will need to buy a separate policy to ensure your house and belongings are covered. Even then, not every flood insurance provider offers an identical policy. This means you will need to pay attention to the nitty-gritty details to ensure you can actually use your coverage if your house is flooded.
What Does Flood Insurance Cover?
There are two different types of flood insurance policies
Just like car insurance can only cover damages to another person’s vehicle (liability coverage) or also to your own vehicle (collision) for an additional fee, flood insurance can only damage to your property. Or, also to the damaged contents inside your house.
Property Flood Insurance
Most plans will reimburse at least 80% of the replacement cost to the structural damage of your primary dwelling up to $250,000. You will not be reimbursed for exterior property features including swimming pools, landscaping, retaining walls, septic tanks, etc. There are also limitations to basements and floors that are below ground level.
While this list isn’t exhaustive, it will provide a general overview of eligible property items:
- Electrical and plumbing systems
- Furnaces, water heaters, and sump pumps
- Refrigerators, cooking stoves, and dishwashers
- Permanently installed wallboard, cabinets, paneling, and bookcases
- Window blinds
- Detached garages
Once again, the items mentioned above must not be located in your basement to qualify.
Contents Flood Insurance
Flood insurance policies can reimburse you at cash value for most belongings including clothing, furniture, and electronics up to $100,000. This doesn’t include precious metals, currency, and valuable papers. Insurance policies will not reimburse you for temporary lodging, loss of business, damaged automobiles, or damage caused by moisture that could have been prevented. Eligible personal possessions must not be stored in your basement, underground crawl space, or walk out basement.
What Flooding Conditions Qualify?
Not every flood is eligible for a claim. Certain criteria must be met:
- Water must have entered from outside your house
- Flooding must occur over at least two acres or damaged at least two properties
Flood insurance is intended for natural disasters only from hurricanes, heavy rain, tropical storms, and flash floods can qualify. If a water pipe breaks within your house and causes damage, the claim is ineligible.
How To Purchase Flood Insurance
The most common flood insurance provider is the National Flood Insurance Program (NFIP). Most policies cost less than $700 per year and the maximum coverage amounts are $250,000 for property loss and $100,000 for personal possessions.
To reduce your annual payment, you can select smaller coverage amounts.
Several private insurers also sell plans that you might prefer instead. Sometimes, these private plans can be cheaper than the federal NFIP plans for the same coverage limits.
Here are a few private alternatives to consider:
Most private insurers offer standard property policies underwritten by the NFIB and serviced by private insurers. You can expect to receive the same quote prices from just about any private insurer. The only difference can be personal possession policies that might be separate from the federal coverage amounts. By going with your current insurance provider you might be able to keep all your insurance payments under one roof.
Your Lender Might Require Flood Insurance
If you are planning on buying a home in a historical flood plain, your lender will require you to buy flood insurance to be approved for a home mortgage. Even after your mortgage is paid in full, it can still be a good idea to keep the insurance to protect yourself from future financial calamity.
Be sure to get quotes from your existing insurer and to also price check a one or two other providers. You never know, you might be able to receive a discount.
Also, be sure to only use an insurance company licensed in your state.
Filing a Claim
You must own your policy for at least 30 days before it goes into effect. This means if a hurricane, levee break, storm surge, or a flash flood occurs within the first 30 days and damages your property, you cannot file a claim.
If eligible flooding occurs after the initial 30-day period, complete the following steps to successfully file a claim:
- Notify your insurance agency immediately
- When safe to re-enter, gather samples of damaged property and personal possessions to give to claims adjuster
- Complete forms by working with claims adjuster
Also, remember are responsible for cleaning up as much mold and mildew as possible to receive your maximum claim amount. Sometimes, this isn’t possible if authorities or lingering floodwaters prohibit you from re-entering your house.
While you hopefully never have to file a claim, using this natural disaster checklist and natural disaster financial toolkit can help you prepare for the unexpected. One of the items you need to consider is flood insurance. Don’t wait till your property is damaged.