Many homeowners feel that their house and property will always be protected as long as the annual insurance premiums are paid on time and standard coverage is in place. However, there is a big misconception when it comes to repairs and replacement costs for a dwelling that has suffered water damage due to flooding. Homeowners with properties located within a floodplain typically must purchase additional flood insurance in order to be protected from a severe loss that could leave a household in financial ruin and without a place to live.
According to the Insurance Information Institute, “It’s important to note that, as a rule, homeowners and renters insurance does not cover damage from flooding. To protect your home, be sure to understand the risk of flooding and what your insurance options are.”
Lines of Coverage
Homes located in a flood zone should definitely have additional protection via flood insurance. A standard homeowners policy will cover disasters such as fire, vandalism, hail, high winds, lighting, and theft. However, flooding and water damage are perils that are typically excluded from a standard policy. Homeowners may purchase additional line item coverage (usually referred to as specific sewer backup coverage) for water issues that can be applied to sewer mishaps. This line of coverage can be for a designated financial amount, but it will not cover flood damage as it only applies to sewer issues.
Flood insurance in certain high-risk areas is offered by the United States government and it is managed by the Federal Emergency Management Agency (FEMA). Flood insurance for those living in a flood zone typically must be purchased in addition to a standard homeowners policy in order to have protection in the event of a flooding episode. Flood insurance is provided by local licensed brokers through the government’s National Flood Insurance Program (NFIP). For more on the NFIP program, click here.
“The National Flood Insurance Program provides coverage for up to $250,000 for the structure of the home and $100,000 for personal possessions. The NFIP provides replacement cost coverage for the structure of your home. This means that the policy will cover the amount necessary to rebuild your home as it was before the damage,” explained the Insurance Information Institute.
Is Flood Insurance Required? Can Homeowners Insurance Alone be Enough?
Residential addresses near the ocean, rivers, lakes, or ponds are at a higher risk to suffer water damage due to their close proximity to bodies of water. Insurance through the NFIP can only be purchased if a person’s home is located within a designated area that is at risk for potential flooding. If a property owner is unsure about their dwelling’s eligibility with the NFIP, he or she should contact the president of the local homeowners association or check with an insurance agency in the area. These individuals will be able to provide a map of the local flood plains and make area residents aware of the need to purchase flood insurance.
During the home buying process, realtors should alert all prospective buyers if a house they are selling is in a flood zone and therefore requires the purchase of flood insurance. This is also something a home inspector should make note of in the report for prospective buyers. Typically, bank lenders will not sign off on a mortgage unless flood insurance is purchased and in place at the time of closing, so it is beneficial to be aware of FEMA’s 30 day wait period.
For more information on how to save money on flood insurance, contact us today.